An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%.How much interest is earned in the first year and how much in the second year of this investment?
A)The interest earned in year one is $8.32 and the interest earned in year two is $8.32.
B)The interest earned in year one is $8.00 and the interest earned in year two is $8.64.
C)The interest earned in year one is $8.64 and the interest earned in year two is $8.00.
D)There is not enough information to solve this problem.

Question

Quizplus · Accepted Answer

The interest earned in the first year can be calculated as 8% of the initial investment of $100, which is $8. The remaining amount at the end of the first year would be $100 + $8 = $108. In the second year, the interest would be calculated on this new principal amount of $108, which is 8% of $108, equal to $8.64. Therefore, the interest earned in year one is $8.00 and the interest earned in year two is $8.64.

An Investment of $100 Today Is Worth $116