Question

Donna deposits $80,000 into an account that pays simple interest at a rate of 3% per year.Tony deposits $80,000 into an account that also pays 3% interest per year. But it is compounded annually.(a)Find the interest Donna and Tony earn during each of the first three years.(b)Then decide who earns more interest for each year.Assume there are no withdrawals and no additional deposits.

Answer 1

Explanation:

Donna

The simple interest formula is given below:

$Simple\;Interest=\frac{Principal\times Rate\times Time}{100}$

Principal = $80,000, Rate = 3%

$Interest=\frac{80000\times3\times1}{100}=\ 2400$

The interest Donna earns for the first, second, and third years are each $2400.

Tony

1st Year

Principal = $80000, Interest Rate=3%

$Interest=\frac{80000\times3\times1}{100}=\ 2400$

2nd Year

Principal = 80000+2400=$82,400, Interest Rate = 3%

The interest for the second year will be:

$Interest=\frac{82,400\times3\times1}{100}=\operatorname{\ }2,472$

3rd Year

Principal = 82,400+2472=$84,872

The interest for the third year will be:

$Interest=\frac{84872\times3\times1}{100}=\operatorname{\ }2546.16$

Answer:

The completed table is attached below: