Answers Financial Math - MA2007 Other Bank AccountsQuestion 13

13

QuizMultiple Choice

Other Bank Accounts

Question 13 • Financial Math - MA2007

Katherine invests $7,770 in a six-month money market account giving 5.8% simple annual interest and $12,500 in a three-year CD giving 7.25% simple annual interest. Assuming that Katherine does not reinvest or renew these investments, how much money will she have when both investments reach maturity, to the nearest dollar?

Answer

A

$2,944

B

$15,219

C

$23,214

D

$30,886

Explanation

Use the simple-interest formula A = P(1 + rt). The six-month account grows to $7,770(1 + 0.058 × 0.5) = $7,995.33, and the three-year CD grows to $12,500(1 + 0.0725 × 3) = $15,218.75. Together they total $23,214.08, which rounds to $23,214: choice C, $23,214.

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