Problem 1: Over a period of years, an investment in an account which pays 6 percent simple interest will:
a. earn the same dollar amount of income as an account returning 7 percent simple interest.
b. earn more income than an account paying 6 percent compound interest.
c. increase in value at the same rate as any other account paying 6 percent interest,
regardless of how the interest is compounded.
d. pay an increasing amount of income each year due to the effects of interest on interest.
e. increase in value less than an account which pays 6 percent compound interest.
Problem 2: A financially wise individual would prefer a loan based on __________ interest and an investment earning __________ interest.
a. compound; compound
b. compound; simple
c. simple; compound
d. simple; simple
e. complex; compound