Mr. Berkey deposits $10,000 in a money market account at his local bank. He receives annual interest of 8% for 7 years. How much interest will he earn on his investment during this time period?
A) $17,140
B) $7,140
C) $17,180
D) $7,180

Question

Quizplus · Accepted Answer

The interest earned can be calculated using the simple interest formula: Interest = Principal × Rate × Time. Here, Principal = $10,000, Rate = 8% or 0.08, and Time = 7 years. So, Interest = $10,000 × 0.08 × 7 = $5,600. However, since the question seems to imply compound interest (given the context of a money market account), we use the compound interest formula: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($10,000), r is the annual interest rate (8% or 0.08), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. Assuming the interest is compounded annually (n=1), A = $10,000(1 + 0.08/1)^(1*7) = $10,000(1.08)^7 ≈ $17,140. The correct calculation based on the options provided and assuming a misunderstanding in the explanation process should yield an amount close to one of the options, but given the options and typical calculations, there seems to be a mistake in the explanation process. The correct approach with compound interest annually would indeed result in a total amount, and the interest earned specifically would be the total amount minus the principal. Without the exact compound interest calculation here, the intended correct answer seems to be a misunderstanding in the explanation provided. The correct calculation for compound interest over 7 years at 8% would indeed yield a total amount, from which you subtract the principal to find the interest earned. Given the options and a reevaluation, the correct interest earned would be closer to the options provided, indicating a need to correct the explanation.

Mr Berkey Deposits $10,000 in a Money Market Account at His