23-107 Assume interest rates are 5 percent in year 2 and 7 percent in year 3.Which of the following is true?

Question

Quizplus · Accepted Answer

The question does not provide any information about any investment or principal amount. Therefore, we can assume that the bank did not invest any initial principal amount.

In year 2, the bank will receive an interest of 5% on $0, which means it will receive $0.

In year 3, the bank will receive an interest of 7% on $0, which means it will receive $0.

Therefore, the best choice is D - the bank will receive $0 at the end of year 2 and receive $50,000 at the end of year 3.

23-107 Assume Interest Rates Are 5 Percent in Year 2