A recent college graduate is looking to begin saving for retirement. Option A is a savings account with 3.5% annual simple interest. Option B is a savings account with 3.5% annual interest compounded monthly. If the principal investment is the same for both options, which account would have a larger balance after 10 years? Option A will have the larger balance after 10 years because simple interest generates earnings from principal only. Option A will have the larger balance after 10 years because simple interest generates earnings from both principal and interest. Option B will have the larger balance after 10 years because compound interest generates earnings from both principal and interest. Option B will have the larger balance after 10 years because compound interest generates earnings from principal only.
