Ben Invests $10,000 at a Rate of Interest of 5

question 87

Multiple Choice

Ben invests $10,000 at a rate of interest of 5 percent for 40 years. Which of the following statements about the return on the investment is true?

• A) Ben will receive more money at the end of 30 years compared to the money received at the end of 40 years.
• B) Ben will receive more money at a 3 percent rate of interest instead of the existing rate.
• C) Ben will receive interest of $5,000 at the end of 10 years.
• D) Ben will receive no interest on his investment at the end of the investment period.
• E) Ben will receive a significant amount at the end of the investment period, due to the feature of compounding.

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Definitions:

Consumption Function

A formula in economics that shows the link between overall consumption and the gross national income.

Price Level

An index that measures the average of prices for goods and services in an economy over a period of time.

Aggregate Expenditure Line

A graphical representation of the total planned spending in an economy at various levels of national income.

Price Level

A measure that reflects the average prices of goods and services in an economy at a specific point in time.