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

b. $159.65

Step-by-step explanation:

Here, the principal amount, P = $12,585,

Annual rate of interest = 3.5 %,

Time, t = 5 years,

Thus, the compound interest,

Now, the simple interest,

Since, the difference between the compound interest and simple interest,

= 2362.03 - 2202.38 = $ 159.65

Hence, $ 159.65 more interest earned in compound annually than that of simple interest.

⇒ Option b is correct.