Suppose That You Have $4000 on Deposit at Your Bank

question 96

Multiple Choice

Suppose that you have $4000 on deposit at your bank at an annual rate of 1.5%. If the bank compounds continuously, how much interest do you receive after three years?

• A) $161.99
• B) $168.74
• C) $175.40
• D) $184.11

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Definitions:

Fair Insurance Policy

An insurance policy for which the premium is equal to the expected value of the claim.

Risk-Averse

The characteristic of preferring to avoid risk, opting for lower but more certain returns over potential higher but uncertain returns.

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Marginal Utility Curve

A graphical representation showing how marginal utility depends on the quantity of the good or service consumed.