Mr. X invested $5,000 for a period of 2 years. The investment plan offered a nominal rate of return of 6% on the investment.
-Refer to the scenario above. Mr. X will have a final balance of ____at the end of two years.
A) $5,300
B) $5,618
C) $10,600
D) $18,024

Question

Quizplus · Accepted Answer

The final balance can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($5,000), r is the annual interest rate (6%, or 0.06), 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), the formula simplifies to A = 5000(1 + 0.06)^2 = $5,618.

Mr X Invested $5,000 for a Period of 2 Years