An Account Paying Annual Compound Interest Was Opened with $1,000

question 277

Multiple Choice

An account paying annual compound interest was opened with $1,000 ten years ago. Today, the account balance is $1,500. If the same interest rate is offered on an account paying simple interest,
How much income would be earned each year over the same time period?

• A) $36.97
• B) $40.41
• C) $40.75
• D) $41.38
• E) $50.00

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Definitions:

Anesthetic Drugs

Substances used to induce anesthesia, rendering the patient insensible to pain.

Novocain

A synthetic compound used as a local anesthetic in medical and dental procedures; it is often substituted for safer and more effective anesthetics today.

Sodium

A chemical element (Na) that is essential for life, involved in osmoregulation and nerve function.

All-Or-None Law

The principle that the strength of a response of a nerve cell or muscle fiber is not dependent upon the strength of the stimulus. If a stimulus is above a certain threshold, a nerve or muscle fiber will fire.