Multiple choice

Jessica invested \$5,000 for one year at a simple annual interest rate of 5 percent and invested \$12,000 for one year at an annual interest rate of 7 percent compounded quarterly. What is the approximate total amount of interest that Jessica earned on the two investments?

  1. $800
  2. $1,100
  3. $1,300
  4. $1,500
  5. $1,700
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

SI = 5000 * 0.05 * 1 = 250. CI = 12000 * ((1 + 0.07/4)^4 - 1) = 12000 * ((1.0175)^4 - 1) = 12000 * (1.071859 - 1) = 12000 * 0.071859 = 862.3. Total = 250 + 862.3 = 1112.3, which is approximately 1100.

AI explanation

The simple interest on the first investment is 5000 x 5 x 1 / 100 = 250. For the second investment compounded quarterly, the rate is 7/4 = 1.75% per period and the time is 4 periods, so the compound interest is 12000 x ((1 + 1.75/100)^4 - 1), which equals about 864. The total interest earned is 250 + 864 = 1114, making 1100 the closest approximate amount.

Keep practicing — related questions