Compounding with Different Interest Rates A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year.What would be the second year future value?
A)$771.07
B)$819.00
C)$823.90
D)$1519.00

Question

Quizplus · Accepted Answer

The future value after the first year would be:

FV1 = 700 * (1 + 0.10) = 770

The future value after the second year would be:

FV2 = 770 * (1 + 0.07) = 823.90

Therefore, the second-year future value is $823.90, which corresponds to choice C.

Compounding with Different Interest Rates a Deposit of $700 Earns