$10,000 invested at 10% per year for 5 years earns interest equal to $6,105.10; therefore,$10,000 invested at 10% per year for 10 years will earn interest equal to $12,210.20 (2 times $6,105.10).

Question

Quizplus · Accepted Answer

Interest earned over time, especially at a constant rate, compounds, meaning the interest earned in the first period earns interest in subsequent periods. Therefore, the interest earned over 10 years at a 10% rate would be more than double the interest earned over 5 years due to the effect of compounding.

$10,000 Invested at 10% Per Year for 5 Years Earns