$100,000 for 20 years compounded at 4% annually results in a rate per period of:
A)3%
B)5%
C)4%
D)1%
E)None of these

Question

Quizplus · Accepted Answer

The formula for compound interest is:

A = P(1 + r/n)^(nt)

Where:
A = final amount
P = principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years

From the given information, we have:

A = $100,000
P = $100,000
r = 4% = 0.04
n = 1 (compounded annually)
t = 20 years

Plugging these values into the formula, we get:

$100,000(1 + 0.04/1)^(1*20) = $219,112.54

Therefore, the rate per period is 4%, which is answer choice C.

$100,000 for 20 Years Compounded at 4% Annually Results in a Rate