Arian is borrowing $2,587.11 from his uncle and has the option to repay with either 3.11% simple interest or 6.8% compound interest annually over 4 years. With simple interest the total interest is $321.83, and with compound interest the total interest is $778.8. The difference between the total interest paid with compound versus simple interest is $456.9.

1. Arian is about to borrow $2,587.11 from his uncle. He has an option to repay the loan at the end
of year 4 with 3.11% simple interest per year or with 6.8% interest per year, compounded
annually. What is the difference of the total interest paid over 4 years between the two options?
(Be careful of sign of answer. Use compound interest amount minus simple interest amont).
Solution
S.I=P*R*T/100
=2587.11*4*3.11/100
=$321.83
By compound interest,
Amount+Interrest=P*(1+r/100) n
=2587.11(1+0.068) 4
=$3365.9
Interrest=$778.8
Diff. C.I-S.I=$456.9