Suppose an investor deposits $2500 in an interest-bearing account at her local bank.The account pays 2.5% interest compounded annually.If the investor plans on withdrawing the original principal plus accumulated interest at the end of 7 years,what is the total amount that
She should expect to receive assuming interest rates do not change?
A)$2,971.71
B)$2,974.89
C)$3,532.43
D)$11,920.93

Question

Quizplus · Accepted Answer

The correct answer is A. The total amount that the investor should expect to receive assuming interest rates do not change is $2,971.71. This is calculated using the formula A = P(1 + r/n)^(nt), where A is the total amount, P is the principal, r is the interest rate, n is the number of times per year that the interest is compounded, and t is the number of years. In this case, P = $2500, r = 2.5%, n = 1 (since the interest is compounded annually), and t = 7. Plugging these values into the formula, we get A = 2500(1 + 0.025/1)^(1*7) = $2,971.71.

Suppose an Investor Deposits $2500 in an Interest-Bearing Account at Her