Asked by Kristin Kowing on Jun 25, 2024
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Jeff invests $3,000 in an account that pays 7% simple interest. How much more could he have earned over a 20-year period if the interest had compounded annually?
A) $2,840.00
B) $3,212.12
C) $3,778.54
D) $4,087.18
E) $4,409.05
Compounded Annually
Interest calculation method where interest is added to the principal sum at the end of each year, and the subsequent interest calculation includes the previously accumulated interest.
Simple Interest
Interest calculated on the principal portion of a loan or deposit, without compounding.
Interest
Payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate.
- Acquire knowledge on the topic of compound and simple interest.
- Compare the effects of different interest rates on investment growth over time.
Verified Answer
Learning Objectives
- Acquire knowledge on the topic of compound and simple interest.
- Compare the effects of different interest rates on investment growth over time.
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