You are given a choice of taking the simple interest on 1000

You are given a choice of taking the simple interest on $100,000 invested for 4 years at a rate of 5% or the interest on $100,000 invested for 4 years at an interest rate of 5% compounded daily. Which would you select? Explain your answer and give the difference in the two investments.

Solution

Simple Interest: Simple Interest refers to an interest that is calculated as a percentage of the principal amount.

Simple Interest = P*r*n

Compound Interest: Compound Interest refers to an interest which is calculated as a percentage of principal and accrued interest.

Compound Interest = P*(1 + r)^nk

the compound intrest incresed rapidly hence i will inverst with simple intrest.