Mark invested an amount of $1,500 for a period of 2 years at a rate of interest of 5%. In order to have a final balance of $1,653.75, Mark should_____.
A) consume the interest earned at the end of each year
B) reinvest the interest earned at the end of the first year
C) withdraw his principal at the end of the first year
D) invest $100 at the end of the first year

Question

Quizplus · Accepted Answer

To achieve a final balance of $1,653.75 from an initial investment of $1,500 over 2 years at a 5% interest rate, Mark needs to reinvest the interest earned at the end of the first year. This is because compound interest (interest on interest) is required to reach the target amount. Simple interest alone would not suffice to reach $1,653.75 in 2 years.

Mark Invested an Amount of $1,500 for a Period of 2