You Are Considering an Investment That Is Expected to Pay

question 26

Multiple Choice

You are considering an investment that is expected to pay 5% in year 1, 7% in years 2 and 3 and 9% in year 4. If you invest $2,000 today, what will this investment be worth at the end of the fourth year?

• A) $2,501.42
• B) $2,693.71
• C) $2,713.04
• D) $2,620.68

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Definitions:

Compounded Monthly

Interest calculated on the initial principal and previously earned interest, recalculated every month.

Car Loan

A financial agreement in which a borrower receives money to purchase a car and agrees to repay the lender over time, typically with interest.

Total Interest

The sum of all interest payments made over the life of a loan or investment.

Compounded Quarterly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods on a quarterly basis.