3. Jerry and Dee have different opinions on how to save money. Jerry likes to have the highest possible amount withheld from his paycheck for their income taxes.

That way, he knows he will not come up short, and he loves getting a big tax refund each spring. When the refund comes, he deposits it into savings; he feels that this is a less painful way to save. Dee prefers to calculate monthly tax withholdings closer to the actual amount owed and deposit the extra cash in their paycheck into their savings account. Jerry and Dee received a tax refund check of $8,000 this year.

(LO 4-2, LO 4-3)

a. What is the cost of Jerry’s method of saving vs.

Dee’s, if the account they are depositing the money in has an APY of 5.4%?

b. What if they were to deposit $666.67 monthly into a savings account that pays 3% interest compounded monthly?

c. What is the difference if their account earns 6%

APR compounded monthly?