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 interested 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 because the total amount that the investor should expect to receive is $2,971.71. This is calculated by multiplying the original principal by the future value factor, which is (1 + r)^n, where r is the annual interest rate and n is the number of years. In this case, the future value factor is (1 + 0.025)^7 = 1.1886, so the total amount that the investor should expect to receive is $2500 * 1.1886 = $2,971.71.

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