Bill Baxter has $26 comma 000 to invest for a year. He can lend it to his sister who has agreed to pay 12% simple interest for the year. Or, he can invest it with a bank at 10% compounded quarterly for the year. How much additional interest would the simple interest loan to his sister generate? Find the effective interest rate for both investments to the nearest hundredth of a percent. Question content area bottom Part 1 First, find the amount of simple interest that would be generated by the loan to the sister. The formula below can be used to find the simple interest. InterestequalsPrincipaltimesRatetimesTime Part 2 Identify the principal, rate, and time. Principal equals $26 comma 000 Rate equals 12% Time equals 1 year Part 3 Find the amount of simple interest. Interest equals PrincipaltimesRatetimesTime equals $26 comma 000times12%times1 equals $3120 Part 4 Next find the compound amount using the compound interest table. To use the table, the total number of compounding periods and the interest rate per compounding period must be known. Part 5 In this case, there are 4 compounding periods in all. Part 6 Divide the annual interest rate by 4 to find the interest rate per period. StartFraction 10 % Over 4 EndFraction equals 2.5% Part 7 Reading from the table, the number corresponding to 4 compounding periods and an interest rate per period of 2.5% is 1.10381. Part 8 Next, find the compound amount

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Part 1 Find the simple interest generated by the loan to the sister The formula for simple interest ... View the full answer