Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Calculate the future value of $7,000 in a. 4 years at an interest rate of 9% per year. b. 8 years at an interest rate
Calculate the future value of $7,000 in a. 4 years at an interest rate of 9% per year. b. 8 years at an interest rate of 9% per year. c. 4 years at an interest rate of 18% per year. d. Why is the amount of interest earned in part (a) less than half the amount of interest earned in part (b)? a. Calculate the future value of $7,000 in 4 years at an interest rate of 9% per year. The future value of $7,000 in 4 years at an interest rate of 9% per year is $ (Round to the nearest dollar.) b. Calculate the future value of $7,000 in 8 years at an interest rate of 9% per year. The future value of $7,000 in 8 years at an interest rate of 9% per year is $ (Round to the nearest dollar.) c. Calculate the future value of $7,000 in 4 years at an interest rate of 18% per year. The future value of $7,000 in 4 years at an interest rate of 18% per year is $ (Round to the nearest dollar.) d. Why is the amount of interest earned in part (a) less than half the amount of interest earned in part (b)? (Select the best choice below.) O A. The interest earned in part (a) is based on a lower effective annual interest rate. OB. This results because you earn more interest on past interest. As interest is earned on the increasing amount of accumulated interest, the money grows faster as time goes on. OC. The amount of interest earned in part (a) is really half of the amount of interest earned in part (b) since in part (b) the money grows for twice as many years as in part (a). O D. The annual interest rate in part (b) is slightly higher than the rate assumed in part (a). This is because of compounding
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started