Donna deposits $60,000 into an account that pays 6% interest per year, compounded annually. Tony deposits $60,000 into an account that also pays 6% per year. But it is simple interest. Find the interest Donna and Tony 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.
Donna deposits $60,000 into an account that pays 6% interest per year, compounded annually. Tony deposits $60,000 into an account that also pays 6% per year. But it is simple interest. Find the interest Donna and Tony 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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Donna deposits $60,000 into an account that pays 6% interest per year, compounded annually.
Tony deposits $60,000 into an account that also pays 6% per year. But it is simple interest.
Find the interest Donna and Tony 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.
Transcribed Image Text:Donna deposits $60,000 into an account that pays 6% interest per year, compounded annually.
Tony deposits $60,000 into an account that also pays 6% per year. But it is simple interest.
Find the interest Donna and Tony 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.
Interest Donna earns
Interest Tony earns
Year
Who earns more interest?
(Interest compounded annually)
(Simple interest)
Donna earns more.
First
Tony earns more.
They earn the same amount.
O Donna earns more.
Second
Tony earns more.
They earn the same amount.
Donna earns more.
Third
Tony earns more.
They earn the same amount.
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