Linda deposits $60,000 into an account that pays simple interest at a rate of 6% per year.Bob deposits $60,000 into an account that also pays 6% interest per year. But it is compounded annually.Find the interest Linda and Bob earn during each of the first three years.Then decide who earns more interest for each year.Assume there are no withdrawals and no additional deposits.YearFirstSecondThirdInterest Linda earns(Simple interest)$3600$3600$3600Interest Bob earns(Interest compounded annually)$3600$3960$4176Who earns more interest?Linda earns more.Bob earns more.They earn the same amount.Linda earns more.Bob earns more.They earn the same amount.Linda earns more.Bob earns more.O They earn the same amount.XS

Simple interest:Simple interest is the amount that you get on your deposits. it is fixed not…

Linda deposits $60,000 into an account that pays simple interest at a rate of 6% per year. Bob deposits $60,000 into an account that also pays 6% interest per year. But it is compounded annually. Find the interest Linda and Bob earn during each of the first three years. Then decide who earns more interest for each year. Assume there are no withdrawals and no additional deposits.

Linda deposits $60,000 into an account that pays simple interest at a rate of 6% per year. Bob deposits $60,000 into an account that also pays 6% interest per year. But it is compounded annually. Find the interest Linda and Bob earn during each of the first three years. Then decide who earns more interest for each year. Assume there are no withdrawals and no additional deposits.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter6: Saving And Investing

Section6.1: Why Save?

Problem 6R

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