T2-21 Multiple Choice A. Barb will earn more interest the first year than Andy w

Question

T2-21 Multiple Choice

A. Barb will earn more interest the first year than Andy will.
B. Andy will earn more interest in year three than Barb will.
C. Barb will earn compound interest.
D. After five years, Andy and Barb will both have earned the same amount of interest.
E. Andy will earn compound interest.

Both Andy and Barb deposited $3,000 this morning into an account that pays 5% interest, compounded annually. Andy will withdraw his interest earnings at the end of each year and spends it. Barb will leave her interest earnings in her account. Given this, which one of the following statements is true?

Explanation / Answer

C. Barb will earn compound interest.

since barb doesn't withdraw any amount, barb will earn interest on interest for every compounding

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