How much more interest is earned on an investment of $12,585 at 3.5% interest over 5 years if the interest is compounded annually rather than earning simple interest? a. They are the same. b. $159.65 c. $2,362.03 d. $12,744.65 Please select the best answer from the choices provided A B C D

Answer:

Compounded annually, your total account is 12585 * 1.035^5=14947.032156. Subtracting the original amount, you get 2362.03 total interest. $2362.03-2202.375=$159.66 more interest earned when compounded annually, versus simple interest.

Explanation:

$159.65 is the more interest is earned on an investment of $12,585 at 3.5% interest over 5 years if the interest is compounded annually rather than earning simple interest. Hence, option B is correct.

Interest earned is the sum of interest from investments that make regular, required payments to the holder. For instance, money placed in an interest-bearing bank account or a certificate of deposit can receive interest.

The compensation a lender or financial organization receives for giving out money is called interest. The percentage of a stockholder's ownership in a corporation that is also referred to as interest.

It is recorded in the general ledger's interest income account. It is a line item that is often recorded in the income statement apart from interest cost. According to the IRS, this income is taxable, and conventional tax rates apply.

Thus, option B is correct.

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