2. Simple versus compound interest Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question. Zoe deposited $900 in a savings account at her bank. Her account will earn an annual simple interest rate of 7%. If she makes no additional deposits or withdrawals, how much money will she have in her account in 13 years? $967.41 $163.00 $2,168.86 $1,719.00 Now, assume that Zoe's savings institution modifies the terms of her account and agrees to pay 7% in compound interest on her $900 balance. All other things being equal, how much money will Zoe have in her account in 13 years? $963.00 $151.82 $1,719.00 $2,168.86 Suppose Zoe had deposited another $900 into a savings account at a second bank at the same time. The second bank also pays a nominal (or stated) interest rate of 7% but with quarterly compounding. Keeping everything else constant, how much money will Zoe have in her account at this bank in 13 years? $2,218.36 $163.00

Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question. Zoe deposited $900 in a savings account at her bank. Her account will eam an annual simple interest rote of 7%. If she makes no additional deposits or withdrawals, how much money will she have in her account in 13 years? $967.41 $163.00 $2,168.86 $1,719.00 Now, assume that Zoe's savings institution modifies the terms of her account and agrees to pay 7% in compound interest on her $900 balance. All other things being equal, how much money will zoe have in her account in 13 years? $963.00 $151.82 $1,719.00 $2,168,86 Suppose Zoe had deposited another $900 into a savings account at a second bank at the same time. The second bank also pays a nominal (or stated) interest rate of 7% but with quarterly compounding. Keeping everything else constant, how much money will zoe have in her account at this bank in 13 years? $2,218,36 $163.00 Suppose Zoe had deposited another $900 into a savings account at a second bank at the same time. The second bank also pays a nominal (or stated) interest rate of 7% but with quarterly compounding. Keeping everything else constant, how much money will zoe have in her account at this bank in 13 years? $2,218.36 $163.00 $964.67 $166.16