Suppose There Is a New Kind of Savings Certificate That

question 100

Multiple Choice

Suppose there is a new kind of savings certificate that starts out paying 3.5% annual interest and increases the interest rate by 1% each additional year that the money is left on deposit.(Assume that interest is compounded continuously and that the interest rate increases continuously.) Assuming an initial deposit of $1500, which of the following investment choices is better?

• A)Investing the money at a fixed interest rate of 5% for 4 years.
• B)Investing the money in the new kind of savings certificate for 4 years.

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Definitions:

Normal Distribution

A probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean. Also known as a bell curve.

Physical Fitness

The ability to perform aspects of sports, occupations, and daily activities without undue fatigue.

Standard Deviation

A measure of the dispersion or variability in a set of data points, representing the average distance from the mean.

Robustness

The ability of a statistical method or test to remain effective under a variety of conditions or assumptions, or when faced with violations of those assumptions.