ECONOMICS
COMPOUND INTEREST
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
Sam decided to start saving for college. He deposited $3, 500 dollars into an account which earns 5% simple annual interest. At the end of each year, he will add $500 to this account at the same 7% interest rate. If Sam continues to save in this manner, what will happen to the savings account over time?
|
|
Sam’s savings account will continue to grow over time.
|
|
|
The total amount of money in Sam’s account will decrease over time.
|
|
|
Sam’s savings account will grow for 5 years, then begin to decrease over time.
|
|
|
Sam’s account will remain the same.
|
Explanation:
Detailed explanation-1: -The future value of $500 one year from today if the interest rate is 6 percent is $530.
Detailed explanation-2: -I=10020000×2×5=Rs. 2, 000. Was this answer helpful?
Detailed explanation-3: -According to the Rule of 72, it would take about 14.4 years to double your money at 5% per year.
There is 1 question to complete.