A deposit of $500 earns 5% the first year, 6% the second year and 7% the third year. What would be the third year future value?
A) $595.46
B) $615.62
C) $634.91
D) $671.02

Question

Quizplus · Accepted Answer

The correct answer is A because the future value of the deposit after the third year is $595.46. This is calculated by multiplying the initial deposit of $500 by the interest rate for the first year (5%), which gives us $25. This is then added to the initial deposit to give us $525. The interest rate for the second year is 6%, which gives us $31.50. This is added to the previous total to give us $556.50. The interest rate for the third year is 7%, which gives us $38.96. This is added to the previous total to give us $595.46.

A Deposit of $500 Earns 5% the First Year, 6