Principal Interest
Year 1
Interest Year 10
Interest Year 20
Total Savings After 20 Years
$12,000 in Simple Interest
Account
$12,000 x
5%
$12,000 x 5%
- $6000
- $600
= $18,000
= $12,600
$12,000 x 5%
- $12000
- $24,000
$12,000 + 20 years of simple
interest
- $24,000
$12,000 x
($12,000 +
$6,615.94)
($12,000+
$18,323.40)
5%
$12,000 in Compound
Interest Account
- $600
$18,615.94 x
5%
= $19546.74
$12,000 + $ 20 years of
compound interest
$31.839.57
$30,323,40 x 5%
$31,839.57
-$12,600
Juanita, who lives with her brother, has saved $12,000 for a down payment on her own house. Her financial planner
suggests she look for a savings account that offers compound interest accounts. Why should Juanita take this advice?
(4 points)
O She will earn interest on the initial deposit, as well as interest earned.
,
O She will have quick access compared to other savings account.
O She is saving for a short-term goal that will be reached soon.
O She has so little to invest that it will be safer over the long term.