Jessica Invests $3,000 in an Account That Pays 5% Simple

question 87

Multiple Choice

Jessica invests $3,000 in an account that pays 5% simple interest. How much more could she have earned over a 7-year period if the interest had compounded annually?

• A) $122.20
• B) $129.20
• C) $147.80
• D) $171.30
• E) $221.30

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Definitions:

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Annual Interest Rate

The interest rate charged by lenders on loans or paid on deposits, standardized as an annual rate.

Rate of Inflation

The Rate of Inflation measures the percentage increase in the general price level of goods and services in an economy over a period of time.

Real Rate of Return

The annual percentage return realized on an investment, adjusted for changes in the price level due to inflation or other external effects.