ECONOMICS
INCENTIVES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Paul’s aunt gives him a birthday gift of $700 in cash. Paul deposits the money into an account that earns simple interest at a rate of 4%. Paul makes no withdrawals. How much interest has his account earned after 7 years?
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$4, 900
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$19, 600
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$196.00
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$7.00
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Explanation:
Detailed explanation-1: -What rate of simple interest is needed for $700 to double, in 3 years? The interest rate required is 33.3% Page 3 8.
Detailed explanation-2: -Installments Under Simple Interest This will be equal to the total interest charged for n months i.e. [P+ (P* n* r)/ 12* 100].
Detailed explanation-3: -Summary: An investment of $10000 today invested at 6% for five years at simple interest will be $13, 000.
Detailed explanation-4: -For example, the interest on a $30, 000, 36-month loan at 6% is $2, 856. The same loan ($30, 000 at 6%) paid back over 72 months would cost $5, 797 in interest.
There is 1 question to complete.