Investigate the difference between compounding annually and simple interest for parts a–j. Round to the nearest cent.
a. Find the simple interest for a 1-year CD for $5,000 at a 2.5% interest rate.
b. Find the interest for a 1-year CD for $5,000 at an interest rate of 2.5%, compounded annually.
c. Compare the results from parts a and b.
d. Find the simple interest for a 3-year CD for $5,000 at an interest rate of 2.5%.
e. Find the interest for a 3-year CD for $5,000 at an interest rate of 2.5%, compounded annually.
f. Compare the results from parts d and e.
g. Find the simple interest for a 6-year CD for $5,000 at an interest rate of 2%.
h. Find the interest for a 6-year CD for $5,000 at an interest rate of 2%, compounded annually.
i. Compare the results from parts g and h.
j. Is interest compounded annually the same as simple interest? Explain.