Asked by Elias Montano on Jun 19, 2024
Verified
Jamie deposits $1,000 into an account that pays 4% interest compounded annually. Chris deposits $1,000 into an account that pays 4% simple interest. Both deposits were made today. All else equal, Jamie made the better investment.
Compounded Annually
Refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods, calculated once per year.
Simple Interest
Interest earned or paid that is not compounded, and is based only on the principal amount.
- Discern the relationship between how often compounding happens and its impact on future values.
Verified Answer
YG
Yulisa GarciaJun 21, 2024
Final Answer :
True
Explanation :
Jamie's investment grows faster due to compound interest, where interest is earned on both the initial principal and the accumulated interest from previous periods, unlike Chris's simple interest investment, which only earns interest on the principal amount.
Learning Objectives
- Discern the relationship between how often compounding happens and its impact on future values.
Related questions
The Future Value of a Single Sum Will Increase More ...
Calculating Present Value and Future Value Using Simple Interest Will ...
A Donation of $250,000 Is Made Today to the Local ...
The National Museum Has Received a Donation of $2,000,000 Which ...
Simon Fraser Recently Received a $20 Million Donation to Be ...