Ben invests $10,000 at a rate of interest of 5 percent for 40 years.Which of the following is true about the return on the investment?

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Quizplus · Accepted Answer

This is because the investment earns interest at a rate of 5% and is compounded annually for 40 years. Compounding means that the interest earned in each year is added to the principal for the next year, which leads to exponential growth in the value of the investment. Therefore, Ben will receive a significant amount at the end of the investment period due to the feature of compounding. The other choices are incorrect because Ben will receive more money at the end of 40 years compared to that at the end of 30 years, a lower rate of interest of 3 percent will result in lower returns, and the interest earned at the end of ten years will be $5,000 only if it is simple interest. Finally, Ben will receive some interest on his investment at the end of the investment period, which will be more than the initial investment due to compounding.

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