SOLUTION: how much interest does a $500 investment earn at 6% over 7 years

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Question 1082566: how much interest does a $500 investment earn at 6% over 7 years
Found 2 solutions by Alan3354, math_helper:
Answer by Alan3354(69443) About Me  (Show Source):
You can put this solution on YOUR website!
Depends on the compounding period, if any.

Answer by math_helper(2461) About Me  (Show Source):
You can put this solution on YOUR website!
It depends, if the interest is compounding one will earn more than if its just simple interest.
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Simple interest: $500*(0.06)*7 = $210.
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(More likely scenario)
Compound interest: (this is when the interest from year 1, or payment period 1, is rolled into the invested amount so that the investment increases for the next interest payment):
+500%2A%281%2B0.06%29%5E7+-+500+=+751.82+-+500+ = $++251.82+
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You can see that power of compounding, after just 7 years, the compounded investment earns 20% more (= (251.82-210)/210 x 100%) than the investment that pays simple interest.