Question

12. Sam just opened a savings account paying 3.5 percent interest, compounded annually. After four years, the savings account will be worth $5,000. Assume there are no additional deposits or withdrawals. Given this, Sam:

a.will earn the same amount of Interest each year for four years
b.will earn simple interest on his savings every year for four years.
c.could have deposited less money today and still had $5.000 In four years If the account pald a higher rate of interest.
d.has an account currently valued at $5,000.
e.could earn more Interest on this account if the Interest earnings were withdrawn annually.

Answer 1

Answer:

c.could have deposited less money today and still had $5.000 In four years If the account paid a higher rate of interest.

Explanation:

Since the Sam has opened a saving account and paying 3.5% interest compounded annually and after four years the amount of saving account is $5,000

So according to this given data, the Sam should do deposited the less money today and can be $5,000 in four years if the account gives a higher rate of interest

The other options are wrong because in the first case, the same amount in compounding earns higher interest rate as compared to the previous years and other two options will also not give such higher rate of interest