At the end of 2020, the interest over this three-year period at Andover Bank is $ 2211.68. (Enter your response rounded to the nearest penny.) At the end of 2020, the interest over this three-year period at Lowell Bank is $ 2250.43. (Enter your response rounded to the nearest penny.) At the end of 2020, you will have earned more on your Lowell Bank CD, because O A. the average rate of interest charged by Andover is less than the average rate of interest charged by Lowell. B. even a modest increase in the interest rate compounded over time will make the earnings higher. O C. it all depends on which bank has the higher interest rate in the beginning. OD. Lowell Bank uses compound interest calculation; Andover does not.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Andover Bank and Lowell Bank each sell one-year certificates of deposit (CDs). The interest rates on these CDs are given in the table below for a three-year period.
Bank
2018
2019
2020
3%
4%
14%
Andover Bank
Lowell Bank
7%
7%
7%
Suppose you deposit $10,000 in a CD in each bank at the beginning of 2018. At the end of 2018, you take your
$10,000 and any interest earned and invest it in a CD for the following year. You do this again at the end of 2019.
At the end of 2020, the interest over this three-year period at Andover Bank is $2211.68. (Enter your response rounded to the nearest penny.)
At the end of 2020, the interest over this three-year period at Lowell Bank is $ 2250.43. (Enter your response rounded to the nearest penny.)
Bank CD, because
At the end of 2020, you will have earned more on your Lowell
O A. the average rate of interest charged by Andover is less than the average rate of interest charged by Lowell.
B. even a modest increase in the interest rate compounded over time will make the earnings higher.
O C. it all depends on which bank has the higher interest rate in the beginning.
O D. Lowell Bank uses compound interest calculation; Andover does not.
Transcribed Image Text:Andover Bank and Lowell Bank each sell one-year certificates of deposit (CDs). The interest rates on these CDs are given in the table below for a three-year period. Bank 2018 2019 2020 3% 4% 14% Andover Bank Lowell Bank 7% 7% 7% Suppose you deposit $10,000 in a CD in each bank at the beginning of 2018. At the end of 2018, you take your $10,000 and any interest earned and invest it in a CD for the following year. You do this again at the end of 2019. At the end of 2020, the interest over this three-year period at Andover Bank is $2211.68. (Enter your response rounded to the nearest penny.) At the end of 2020, the interest over this three-year period at Lowell Bank is $ 2250.43. (Enter your response rounded to the nearest penny.) Bank CD, because At the end of 2020, you will have earned more on your Lowell O A. the average rate of interest charged by Andover is less than the average rate of interest charged by Lowell. B. even a modest increase in the interest rate compounded over time will make the earnings higher. O C. it all depends on which bank has the higher interest rate in the beginning. O D. Lowell Bank uses compound interest calculation; Andover does not.
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