Cecilia is considering two investments with the $5000 she received as college gr
ID: 2627256 • Letter: C
Question
Cecilia is considering two investments with the $5000 she received as college graduation gifts from her family and friends.
She can either invest it earning simple interest or compound interest. The interest rate she will receive will be 8.5% for
either investment. She is trying to determine the future value over the next 6 years using simple and compound interest.
Assume that interest is earned annually at the end of each year.
Simple Intereset Timeline
0 year--?
1--
2---
3---
4--
5---
6---
Compound Intereset Timeline
0 year-- ?
1--
2---
3---
4--
5---
6---
Explanation / Answer
simple interest
FV = n* (1+i) *present value
n: number of years
i: rate of interest
coumpound
FV = Present value * (1+i)n
year future value 0 5000 1 5425 2 5850 3 6275 4 6700 5 7125 6 7550Related Questions
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