Solve the problem.Jesse invests $1000 for 2 years in an investment that bears 8% interest compounded annually. On the same day that Jesse invests his money, Shirley invests $1000 in a simple interest account with an interest rate of On the date of maturity, Shirley her money, including the interest, for a second year. Without using calculations, explain which person, if either, has made the more profitable investment.

Question

What will be an ideal response?

Answer 1

The investments are identical. Compound interest accounts are just simple interest investments that are automatically re-invested at the end of a pre-determined term.