Question

Sage decides to cash in all his savings to open a recording studio. he has three accounts to cash in. the first earned 9 percent for two years. the second earned 6 percent for three years. and the last earned 3 percent for six years. supposing he started with $5,000 in each account, from which account will he get the most cash? a. the two-year account at 9 percent b. the three-year account at 6 percent c. the six-year account at 3 percent d. the accounts are all worth the same.

Answer 1

The future worth of money that is invested currently can be calcualted through the equation,

F = P x (1 + i)^n

where F is the future worth, P is the present worth, i is the interest, and n is the number of years.

a. F = (5,000)(1 + 0.09)^2 = $5,940.5
b. F = (5,000)(1 + 0.06)^3 = $5,955.08
c. F = (5,000)(1 + 0.03)^6 = $5,970.26

Hence, the answer to this item is letter C.