Explanation:
Interest, is an additional money paid for borrowing money. it could be simple or compound interest.
simple interest= p×T×R/100
when interest is compounded annually
F= p(1+r)^t
F= future value
p= principal
r= rate
t= time
compound interest is calculated based on the initial and accumulated interest.
interest Linda earns
fist year
F= p(n+r)^n
F= 10000(1+0.02)^1
F= 10000×1.02= $10200
interest= 10200-10000
interest = $200
second year
F = 10200(1+0.02)^1
F=10200×1.02= $10404
Interest= 10404-10200
interest= $204
third year
F= 10404(1+0.02)^1
F= 10404(1.02)
F = $10612.08
interest= 10612.08-10404
interest= $208.08
Bob's interest
I= p×t×R/100
first year
I=10000×1×0.02/100
interest= $2
second year
I= 10000×2×0.02/100
interest= $4
for the third year
I =10000×3 × 0.02/100
interest= $6
check answer above for final computation