Question

Account A pays simple interest.

Future ValueA = Principal + Interest
= Principal + [(Principal x Interest Rate) x Investment Period]
= $2,000 + [($2,000 x 996) x 3 years]
Future Value of Account X Note: Account X pays compound interest.
Future Valuex = Present Value x Interest Rate Factor
= Present Valuex(1 +Interest Rate)n years
= $2,000 x (1 + 0.09)3
To find the interest rate factor, you can use three different ways, including multiplying it out:
Interest Factor(1 0.09) x (1 0.09) x (1 0.09)1.2950
Or using exponents and calculating it directly:
Interest Factor(10.09)31.2950
Or looking up the value in the Future Value Interest Factor Table:

Interest Factors
Periods 6% 7% 8% 9% 10 11
1 1.0600 1.0700 1.0800 1.0900 1.1000 1.1100
2 1.1236 1.1449 1.1664 1.1881 1.2100 1.2321
3 1.1910 1.2250 1.2597 1.2950 1.3310 1.3676
4 1.2625 1.3108 1.3605 1.4116 1.4641 1.5181
The fourth alternative for solving the equations is to let a financial calculator perform the calculation. This requires that you know how your calculator functions and how to enter the following variables:
P/ Y N I / YR PV FV
1 3 9 2,000
P/Y indicates the number of compounding periods per year, N is the number of years, I is the interest rate, PV is present value, and FV is future value.
Difference in Future Values
Difference = FVx_FVA

Answer 1

Step-by-step explanation:

Interest Factors

Periods 6% 7% 8% 9% 10% 11 %

1 1.0600 1.0700 1.0800 1.0900 1.1000 1.1100

2 1.1236 1.1449 1.1664 1.1881 1.2100 1.2321

3 1.1910 1.2250 1.2597 1.2950 1.3310 1.3676

4 1.2625 1.3108 1.3605 1.4116 1.4641 1.5181

1)

Future value paying simple interest = Principal + [( principal * interest) * investment period]

Future value paying simple interest = $2,000 + [ ( $2,000 * 9%) * 3]

Future value paying simple interest = $2,000 + 540

Future value paying simple interest = $2,540

2)

Future value paying compound interest = Present value * ( 1 + interest)n

Future value paying compound interest = $2,000 * ( 1 + 0.09)3

Future value paying compound interest = $2,000 * 1.295029

Future value paying compound interest = $2,590.058

3)

Difference = $2,590.058 - 2,540

Difference = $50.058