Question

multiple choice - please circle the correct answer.

1. the lowest interest rate is usually earned on a:

a. money market account
b. passbook account
c. certificate of deposit
d. mutual fund

1. the total interest earned on $100 for two years at 10% compounded annually would be:

a. $2
b. $21
c. $11
d. $10

1. based on the rule of 72, money earning 6% would take ______ years to double.

a. 6
b. 8
c. 9
d. 12

1. the investment with the most risk would be:

a. a savings account
b. mutual funds
c. corporate stocks
d. certificate of deposit

Explanation:

Step1: Calculate compound - interest

The compound - interest formula is \(A = P(1 + r)^t\), where \(P=\$100\), \(r = 0.1\), and \(t = 2\).

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Step2: Calculate the interest

The interest \(I=A - P\). Since \(A = 121\) and \(P = 100\), then \(I=121-100 = 21\).

Answer:

B. \(\$21\)