Question: the answer must be clear and need typed answer You and a friend are discussing the return on an account with an initial balance of

the answer must be clear and need typed answer

You and a friend are discussing the return on an account with an initial balance of $100 and an APY of 5%. You want to use the APY Balance Formula, as follows. balance after y years = principal x (1 + APY) Your friend says that he has a simpler approach. Each year add 5% of $100, or $5, to the balance. Is your friend's approach valid? What term is used to describe the interest calculation employed by your friend? Under what conditions will your friend's approach give a reasonably good solution? My friend is describing "Simple Interest," where no compounding is done. This will never give a reasonable estimate for estimating a situation with compounding. My friend is describing "Compounding Interest" because the interest is being multiplied by the number of years. This will give a reasonable estimate for the APY Balance Formula when estimating for any length of time. My friend is describing "Simple Interest," where no compounding is done. This will always be a reasonable estimate whether the time under consideration is short or long. My friend is describing "Compounding Interest" because the interest is being multiplied by the number of years. This will give a reasonable estimate for the APY Balance Formula when estimating for short time periods. My friend is describing "Simple Interest," where no compounding is done. This might be a reasonable estimate if the time under consideration is short

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!

the answer must be clear and need typed answer You and a friend are discussing the return on an account with an initial balance of $100 and an APY of 5%. You want to use the APY Balance Formula, as...

Answer all please will rate quick Assuming a 1-year, money market account investment at 2.69 percent (APY), a 1.65 percent inflation rate, a 28 percent marginal tax bracket, and a constant $40,000...

Based on the following essay I have to answer these questions; Section 1 what specifically is the problem you will address and what specifically is the solution you are offering? Your solution is...

answer must be in 100-200 words You and a friend are discussing the return an an account with a balances of $100 ANYS. You want to use the Ay Balance formula, as follow balance after years principal...

You are a speculator who sells a put option on Canadian dollars for a premium of $.05 per unit, with an exercise price of $.67. The option will not be exercised until the expiration date, if at all....

Barrys Clothing Stores, Inc. released its annual report for the current year and included the following comparative balance sheets and income statement. . Additional Information: 1. Barrys sold...

Select all of the Following that would most likely be considered a Sunk Cost. Cost of Monthly Rental of a Forklift for the Factory Cost of Office Equipment in the Accounting Department Cost of Land...

When older adults have difficulty with transportation and communication, or may be reluctant to request needed assistance to which they are entitled, they may be in need of: Group of answer choices...