Ben invests $10,000 at a rate of interest of 5 percent for 40 years. Which of the following statements about the return on the investment is true?
A) Ben will receive more money at the end of 30 years compared to the money received at the end of 40 years.
B) Ben will receive more money at a 3 percent rate of interest instead of the existing rate.
C) Ben will receive interest of $5,000 at the end of 10 years.
D) Ben will receive no interest on his investment at the end of the investment period.
E) Ben will receive a significant amount at the end of the investment period, due to the feature of compounding.

Question

Quizplus · Accepted Answer

The correct statement is that Ben will receive a significant amount at the end of the investment period, due to the feature of compounding. This means that the interest earned on the investment will be reinvested and earn additional interest over time, leading to a higher return on the investment. None of the other statements are true. Ben will receive more money at the end of 40 years compared to the money received at the end of 30 years due to the longer investment period. Ben would not receive more money at a 3 percent rate of interest instead of the existing rate of 5 percent. Ben will receive more than $5,000 in interest at the end of 10 years due to compounding. Finally, Ben will receive interest on his investment at the end of the investment period.

Ben Invests $10,000 at a Rate of Interest of 5