Tom wants to deposit $100 in a bank for three years. He can either 1) leave the money for three years and earn an annual rate of 5% or 2) deposit money for two years and earn annual interest rate of 4.5%, then come back to the bank and re-deposit the original investment plus earned interest for one additional year. What value of annual interest rate applied to a one-year deposit two years from now would yield the very same outcome for Tom if he chooses option #2 compared to how much he would collect after three years is he goes with option #1?
Added by Holly S.
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