Answer:
Jenny will earn $ 1,000 in interest each year, while Frank will earn $ 1,000 the first year, $ 1,020 the second, and $ 1,040.40 the third.
Step-by-step explanation:
Since Jenny deposited $ 50,000 into an account that pays simple interest at a rate of 2% per year and Frank deposited $ 50,000 into an account that also pays 2% interest per year but it was compounded annually, to find the interest Jenny and Frank earn during each of the first three years and decide who earns more interest for each year assuming there are no withdrawals and no additional deposits, the following calculation must be performed:
Jenny:
Year 1 = 50,000 x 1.02 = 51,000
Year 2 = 50,000 x 1.02 = 51,000 + 1,000 = 52,000
Year 3 = 50,000 x 1.02 = 51,000 + 2,000 = 53,000
Frank:
Year 1 = 50,000 x 1.02 = 51,000
Year 2 = 51,000 x 1.02 = 52,020
Year 3 = 52,000 x 1.02 = 53,060.40
