Discuss why the two methods result in different results

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Question: Explain which of the two options below results in a lower balance after 6 months on an investment of $6,000.

1) Annual simple interest of 12% applied at the end of 6 months.

2) A monthly interest rate of 1% applied at the end of each month and before the start of the next month. (Compound interest at 12% per year, compounded monthly.)

Discuss why the two methods result in different results.

In what circumstances might you select one option over another?

Reference no: EM131972870

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