Compare the interest earned from #1, $900, (where simple interest was used) to #5 ,$2616.10, (where compound interest was used). The principal, annual interest rate, and time were all the same; the only difference was that for #5, interest was compounded quarterly. Does the difference in interest earned make sense? Select one of the following statements. No, because more money should have been earned through simple interest than compound interest. Yes, because more money was earned through simple interest. For simple interest you earn interest on interest, not just on the amount of principal. No, because more money was earned through simple interest. For simple interest you earn interest on interest, not just on the amount of principal. Yes, because more money was earned when compounded quarterly. For compound interest you earn interest on interest, not just on the amount of principal.
Compare the interest earned from #1, $900, (where simple interest was used) to #5 ,$2616.10, (where compound interest was used). The principal, annual interest rate, and time were all the same; the only difference was that for #5, interest was compounded quarterly. Does the difference in interest earned make sense? Select one of the following statements. No, because more money should have been earned through simple interest than compound interest. Yes, because more money was earned through simple interest. For simple interest you earn interest on interest, not just on the amount of principal. No, because more money was earned through simple interest. For simple interest you earn interest on interest, not just on the amount of principal. Yes, because more money was earned when compounded quarterly. For compound interest you earn interest on interest, not just on the amount of principal.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- Compare the interest earned from #1, $900, (where simple interest was used) to #5 ,$2616.10, (where compound interest was used). The principal, annual interest rate, and time were all the same; the only difference was that for #5, interest was compounded quarterly. Does the difference in interest earned make sense? Select one of the following statements.
- No, because more money should have been earned through simple interest than compound interest.
- Yes, because more money was earned through simple interest. For simple interest you earn interest on interest, not just on the amount of principal.
- No, because more money was earned through simple interest. For simple interest you earn interest on interest, not just on the amount of principal.
- Yes, because more money was earned when compounded quarterly. For compound interest you earn interest on interest, not just on the amount of principal.
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