You Deposit $100 in a Bank for a Fixed 7

question 102

Multiple Choice

You deposit $100 in a bank for a fixed 7 year term.Interest on the deposit is calculated every half-year (m = 2) at the rate of 5% per half-year (i/m = 5%) .Because the term is fixed,you are not allowed to withdraw interest at any point.You earn interest in the final compounding period of the term.How much of that interest is earned off of earlier interest (as opposed to earned off of the principal) ?

• A) $4.43
• B) $9.43
• C) $4.90
• D) $5.00
• E) $9.90

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Definitions:

Undisclosed Principal

An undisclosed principal is a party in a contractual agreement who remains unknown to the other party or parties involved.

Unidentified Principal

In agency law, this refers to a situation where an agent acts on behalf of a principal who is not disclosed to the third party at the time of the transaction.

Liability

The state of being legally responsible for something, typically involving financial or legal obligations that result from one's actions or agreements.

Contractual Authority

The power granted to an individual or entity to enter into legally binding contracts on behalf of another person or organization.