Stanley deposits $1,000 into a savings account that pays 1% interest per year. At the end of the first year, he's earned $10 in interest and there is $1,010 in the account. If the account has simple interest, the 1% interest for year two would be based off . If the account has compounding interest, the 1% interest for year two would be based off ____. (note: the first choice goes in the first blank, the second choice goes in the second blank).

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24-11-2022
Mathematics

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Stanley deposits $1,000 into a savings account that pays 1% interest per year. At the end of the first year, he's earned $10 in interest and there is $1,010 in the account. If the account has simple interest, the 1% interest for year two would be based off . If the account has compounding interest, the 1% interest for year two would be based off ____. (note: the first choice goes in the first blank, the second choice goes in the second blank).

Answer :

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priyakumarit10 priyakumarit10 · Answer 1 · 2022-12-02T08:03:18-05:00

If the account has simple interest, the 1% interest for year two would be based off simple interest. If the account has compounding interest, the 1% interest for year two would be based off Compound interest.

Interest on Interest

In performing a straightforward interest calculation, $1,000 that earned 1% interest in one year would yield $1,010 (or .01 x 1,000) at the end of the year. However, that calculation is based on simple interest, paid only on the principal or the deposited funds.

In savings accounts, interest can be compounded, either daily, monthly, or quarterly, and you earn interest on the interest earned up to that point.

The more frequently interest is added to your balance, the faster your savings will grow. Using our $1,000 example earlier and applying daily compounding every day, the amount that earns interest grows by another 1/365th of 1%. At the end of the year, the deposit has grown to $1,010.05 versus $1,010 via simple interest.

Hence the answer is If the account has simple interest, the 1% interest for year two would be based off simple interest. If the account has compounding interest, the 1% interest for year two would be based off Compound interest.

To learn more about simple and compound interest click here https://brainly.com/question/3575751

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