How much interest is earned on a principal of $846.81 invested at an interest rate of 5% over 2 years?

If $846.81 is invested at an interest rate of 5% over 2 years, the simple interest earned is $84.681, and the compound interest earned is $86.79.

Expert Answers

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The interest earned on a principal of $846.81 invested at an interest rate of 5% over 2 years has to be determined.

If an amount P is invested for t years at an interest rate r, the simple interest earned is given by the formula

SI = P*t*r

Here, the principal P is $846.81, the rate of interest r is 5%, and this is invested for t = 2 years.

The simple interest earned is equal to 846.81*0.05*2 = $84.681.

If an amount P is invested for t years at an interest rate r, the compound interest earned is given by the formula

`CI = P*((1+r)^n - 1)`

Here, the principal P is $846.81, the rate of interest r is 5%, and this is invested for t = 2 years.

The compound interest earned is equal to `846.81*((1+0.05)^2-1)` = $86.79.

For $846.81 invested at an interest rate of 5% over two years, the simple interest earned is $84.681, and the compound interest earned is $86.79.

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