Question

1. According to the table, what has the investor done with money earned through interest?

2. From looking at the table, explain the concept of compound interest.

3. According to the table, if the interest rate on this account were 10 percent, how much money would you have in the account at the end of the first year?

4. According to the table, if you added $50 to this account every year, what effect would it have on the interest rate that you earned?

5. According to the table, the investment has doubled in worth by the start of which year?

Answer 1

1. According to the table, the customer leaves the money earned through interest to be added to the principal, to serve as the new principal on which an interest is calculated for the next period or year

2. Compound interest is the interest calculated based on a principal that is the addition of the previous interest to the previous beginning principal. The compound interest can also be called the interest on interest or the interest due to reinvestment of the interest added to the initial amount of each period

3. If the interest rate was 10% rather than 5%, then, with a principal of $100.00 the interest will be $100 × 10/100 = $10, and the total in the account will be $100.00 + $10.00 = $110.00

4. If $50 is added to the account every year, it will increase the interest, but the interest rate will stay the same

5. The investment has more than doubled in worth from $100.00 to $207.90 at the start of the 15th year

Step-by-step explanation: