An investor deposits $400 into a bank account that earns an annual interest rate of 8%. Based on this information, how much interest will he earn during the second year alone?
A) $25.60
B) $32
C) $34.56
D) $64

Question

Quizplus · Accepted Answer

To calculate the interest earned during the second year, we first need to calculate the interest earned during the first year.

Interest earned during the first year = principal x rate of interest = 400 x 0.08 = $32

At the end of the first year, the total amount in the account will be:

Total amount = principal + interest earned during the first year = 400 + 32 = $432

Now, we need to calculate the interest earned on this new amount during the second year:

Interest earned during the second year = new amount x rate of interest = 432 x 0.08 = $34.56

Therefore, the correct answer is:

Answer: C

An Investor Deposits $400 into a Bank Account That Earns