Suppose you deposit $600 into an account paying 5% annual interest. You decide to keep your money in that account for 10 years. Fill out the following tables for two scenarios:

Q1 A. (7 points). Assume the account is paying simple interest – meaning earned interest is not reinvested.

Principal	Annual Simple Interest	Total Simple Interest at the end of the investment horizon	Total $ on the account at the end of the investment horizon
Formula: none	Formula:	Formula:	Formula:
Answer:	Answer:	Answer:	Answer:

B. (5 points). Assume the account is paying compound interest – meaning earned interest is reinvested and earns its own interest.

Principal	Annual Compound Interest	Total Compound Interest at the end of the investment horizon	Total $ on the account at the end of the investment horizon
Formula: none	Formula: none	Formula:	Formula:
Answer:	Answer: none	Answer:	Answer:

C. (2 points). What is the effect of the interest compounding? That is, how much more money did you earn with compound interest?

Formula:

Answer:

Answer rating: 100% (QA)

1 A Simple Interest Principal 600 Annual Simple Interest 30 5 of 600 Total Simple Interest at the en... View the full answer