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Jamie deposits $1,000 into an account paying 6 percent interest, compounded annually.

Please help with the following questions.

1. Jamie deposits $1,000 into an account paying 6 percent interest, compounded annually. At the same time, Amy deposits $1,000 into an account paying 3 percent interest, compounded annually. Over a 5 year period,
a. both Jamie and Amy will earn the same amount of interest.
b. Jamie will earn exactly twice the amount of interest that Amy earns.
c. Amy will earn exactly twice the amount of interest that Jamie earns.
d. Jamie will earn somewhere between 1 and 2 times the amount of interest that
Amy earns.
e. Jamie will earn more than twice the amount of interest that Amy earns.

2. All else constant, the present value will __________ as the period of time decreases, given an interest rate greater than zero.
a. remain constant
b. decrease
c. increase
d. either remain constant or decrease
e. either remain constant or increase

3. The present value of $10,000 to be received in 10 years will __________ if the discount rate is increased.
a. remain constant
b. decrease
c. increase
d. either remain constant or increase
e. either remain constant or decrease

Solution Preview

1. Jamie deposits $1,000 into an account paying 6 percent interest, compounded annually.At the same time, Amy deposits $1,000 into an account paying 3 percent interest, compounded annually. Over a 5 year period,
a. both Jamie and Amy will earn the same amount of interest.
b. Jamie will earn exactly twice the amount of interest that Amy earns.
c. Amy will earn exactly twice the ...

Solution Summary

Jamie deposits $1,000 into an account paying 6 percent interest, compounded annually. At the same time, Amy deposits $1,000 into an account paying 3 percent interest, compounded annually. Over a 5 year period...

$2.19