Jerry and Dee have different opinions on how to save money. Jerry likes to have the highest possible amount withheld from his paycheck for their income taxes. That way, he knows that he will not come up short and he loves getting a big tax refund each spring. When the refund comes, he deposits it into savings; he feels that this is a less painful way to save. Dee prefers to calculate monthly tax withholdings closer to the actual amount owed. Jerry and Dee received an $8,000 tax refund check this year.

a. What is the cost of Jerry’s method of savings vs. Dee’s if the account they are depositing the money in has an APY of 5.4%?

b. What if they would deposit $666.66 monthly into the savings account that pays 3% interest compounded monthly?

c. What is the difference if their account earns 6% APR compounded monthly?