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Andy deposited $3,000 this morning into an account that pays 5 percent interest, compounded annually. Barb also deposited $3,000 this morning into an account that pays 5 percent interest, compounded annually. Andy will withdraw his interest earnings and spend it as soon as possible. Barb will reinvest her interest earnings into her account. Given this, which one of the following statements is true?

Correct Answer

​Barb will earn more interest the second year than Andy.

Correct Answer

​Andy will earn more interest in year three than Barb will.

Correct Answer

​Barb will earn more interest the first year than Andy will.

Correct Answer

​Andy will earn compound interest.

Correct Answer

​After five years, Andy and Barb will both have earned the same amount of interest.

Answer :

jepessoa

Answer:

The answer is: ​Barb will earn more interest the second year than Andy.

Explanation:

The magic of compounding interest refers to the fact that the more frequently your money earns compounding interest, the bigger your balance will grow. Compounding interest adds earned interest into your account and then pays you an interest over the previous interest.

So Barb will earn more interest in the second year since the interest she earned in the firs year will gain more interest.

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