Jesse Invests $1000 for 2 Years in an Investment That

question 192

Essay

Jesse invests $1000 for 2 years in an investment that bears 8% interest compounded
annually. On the same day that Jesse invests his money, Shirley invests $1000 in a simple
interest account with an interest rate of 8%. On the date of maturity, Shirley re-invests her
money, including the interest, for a second year. Without using calculations, explain which
person, if either, has made the more profitable investment.

---

Definitions:

Asset Acquisition

Asset acquisition refers to the process of obtaining control over assets, typically through purchase or lease, for use in operations.

Straight-Line Depreciation

Straight-line depreciation is an accounting method wherein an asset's cost is evenly distributed over its estimated useful life, leading to a consistent depreciation expense each year.

Salvage Value

The calculated return value of an asset at the end of its functional life.

Useful Life

The period over which an asset is expected to be useful in the operations of a business.