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.

Addison deposited $1,000 in a savings account at her bank. Her account will earn an annual simple interest rate of 5.8%. If she makes no additional deposits or withdrawals, how much money will she have in her account in 9 years?

$1,061.36

$158.00

$1,661.01

$1,522.00

Now, assume that Addisons savings institution modifies the terms of her account and agrees to pay 5.8% in compound interest on her $1,000 balance. All other things being equal, how much money will Addison have in her account in 9 years?

$1,522.00

$1,661.01

$96.34

$1,058.00

Suppose Addison had deposited another $1,000 into a savings account at a second bank at the same time. The second bank also pays a nominal (or stated) interest rate of 5.8% but with quarterly compounding. Keeping everything else constant, how much money will Addison have in her account at this bank in 9 years?

$103.03

$158.00

$1,059.27

$1,679.09