The amount in simple interest is $3624 and in compound interest is $3674 the difference is of $50. So he should choose Simple interest.
Simple interest is based on the principal amount of a loan or deposit. In contrast, compound interest is based on the principal amount and the interest that accumulates on it in every period.
Here we have the principle is $3000 for 4 years at the rate of interest of 5.2%. Now we will calculate the total amount by simple interest and compounded annually.
By using Simple interest:-
[tex]\rm SI=\dfrac{P\times T\times R}{100}=\dfrac{3000\times 4\times 5.2}{100}=624[/tex]
So the total amount will be =3000+624=$3624
By using the Compound interest formula:
[tex]A=P(1+\dfrac{r}{n})^{nt}[/tex]
[tex]A=3000(1+\dfrac{5.2}{1})^{4}[/tex]
[tex]A=\$3674[/tex]
The difference between the two amounts will be =3764-3624=$50
Hence amount in simple interest is $3624 and in compound interest is $3674 the difference is of $50. So he should choose Simple interest.
To know more about Compound interest Follow
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