Sun Lee has $500 today. Which one of the following statements is correct if she invests this money at a positive rate of interest for five years?
A) The higher the interest rate she earns, the less money she will have in the future.
B) The higher the interest rate, the longer she has to wait for her money to grow to $1,000 in value.
C) If Sun Lee can earn 7%, she will have to wait about six years to have $1,000 total.
D) At the end of the five years Sun Lee will have less money if she invests at 5% rather than at 7%.
E) At 10% interest Sun Lee should expect to have $1,000 in her account at the end of the five years.

Question

Quizplus · Accepted Answer

The correct answer is D because the amount of money Sun Lee will have at the end of five years increases with the interest rate. Therefore, investing at a 7% interest rate will yield more money than investing at a 5% rate, assuming all other factors remain constant.

Sun Lee Has $500 Today