Question
Louise invests an amount of money into a bank account that pays interest at 5% per year effective. For the next 15 years, she reinvests
Louise invests an amount of money into a bank account that pays interest at 5% per year effective. For the next 15 years, she reinvests the interest payments (as they come) into a second bank account that pays interest at 4% per year effective.
At the end of the 15 years, Louise withdraws all of the money from both accounts and calculates the yield rate that she earned on the original investment.
Select the correct statement regarding this yield rate:
A The yield rate may be below 4% per year or above 5% per year.
B The yield rate is above 5% per year.
C The yield rate is below 4% per year.
D The yield rate is somewhere between 4% per year and 5% per year.
E None of the above
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