Sam wants to invest $5,000 for 5 years.Which one of the following rates will provide him with the largest future value?
A)5 percent simple interest
B)5 percent interest, compounded annually
C)6 percent interest, compounded annually
D)7 percent simple interest
E)7 percent interest, compounded annually

Question

Quizplus · Accepted Answer

Compound interest generates more earnings compared to simple interest. Among the given choices, the highest interest rate will yield a larger future value. Therefore, the best choice is 7 percent with annual compounding.

Sam Wants to Invest $5,000 for 5 Years