Question

Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question. Heather deposited $1,700 at her local credit union in a savings account at the rate of 9.8% paid as simple interest. She will earn interest once a year for the next 13 years. If she were to make no additional deposits or withdrawals, how much money would the credit union owe Heather in 13 years? $1,882.93 $3,865.80 $266.60 $5,731.65

Answer 1

The correct answer in this case is $3865.8

Step-by-step explanation:

The first thing to do is to calculate the on the principal in thirteen years' time using the below formula:

I=PRT

I is the interest which is unknown

P is the principal of $1700

R is the rate of interest of 9.8%

T is the length of the deposit which is 13 years

I=1700*9.8%*13=$2165.8

The total amount owed by the credit union in 13 years=principal+interest

=$1,700+$2,165.8

=$3865.8

The correct option is is the second option