Donald Is a College Student Who Has $4,000 in Savings

question 31

Multiple Choice

Donald is a college student who has $4,000 in savings that he earned from his summer job.He plans to leave the $4,000 in a 6 percent certificate of deposit (CD) for three years,but his banker has asked Donald whether he wants the interest earned on the CD mailed to him at the end of each year or reinvested in the CD.Approximately how much more will Donald earn if he decides to reinvest the interest rather than withdrawing the interest income each year?

• A)$14
• B)$44
• C)$144
• D)$240

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Definitions:

Weighted-Average Method

An inventory costing method that assigns an average cost to each unit of inventory, calculating it based on the weighted average of the cost of goods available for sale.

Ending Inventory

The cumulative worth of merchandise available for purchase at the conclusion of a financial period.

FIFO Method

"First-In, First-Out", an inventory valuation method where goods first added to inventory are the first ones considered sold.

Ending Inventory

The total value of goods available for sale at the end of an accounting period.