Donna deposits $20,000 into an account that pays simple interest at a rate of 4% per year. Tony deposits $20,000 into an account that also pays 4% interest per year. But it is compounded annually. 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. Year First Second Third Interest Donna earns (Simple interest) $0 $0 Interest Tony earns (Interest compounded annually) $0 $0 Who earns more interest? O Donna earns more. O Tony earns more. O They earn the same amount. O Donna earns more. O Tony earns more. O They earn the same amount. O Donna earns more. O Tony earns more. O They earn the same amount.
Donna deposits $20,000 into an account that pays simple interest at a rate of 4% per year. Tony deposits $20,000 into an account that also pays 4% interest per year. But it is compounded annually. 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. Year First Second Third Interest Donna earns (Simple interest) $0 $0 Interest Tony earns (Interest compounded annually) $0 $0 Who earns more interest? O Donna earns more. O Tony earns more. O They earn the same amount. O Donna earns more. O Tony earns more. O They earn the same amount. O Donna earns more. O Tony earns more. O They earn the same amount.
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 61P
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Transcribed Image Text:Donna deposits $20,000 into an account that pays simple interest at a rate of 4% per year.
Tony deposits $20,000 into an account that also pays 4% interest per year. But it is compounded annually.
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.
Year
First
Second
Third
Interest Donna earns
(Simple interest)
$
$
$
Interest Tony earns
(Interest compounded annually)
$0
$
$0
Who earns more interest?
Donna earns more.
Tony earns more.
They earn the same amount.
Donna earns more.
Tony earns more.
They earn the same amount.
Donna earns more.
Tony earns more.
They earn the same amount.
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