Chapter 4.B, Problem 1QQ

Consider two investments, one earning simple interest and one earning compound interest. If both start with the same initial deposit (and you make no other deposits or withdrawals) and earn the same annual interest rate, after two years the account with simple interest will have

1. a greater balance than the account with compound interest.
2. a smaller balance than the account with compound interest.
3. the same balance as the account with compound interest.