A single deposit of $25,000 is made into an account that earns interest at j₄ = 7% for one year,j₂ = 6% for the next year and j₆ = 3% thereafter.How much interest is earned in the fourth year? A)$143.93 B)$863.58 C)$889.82 D)$916.85

Question

Quizplus · Accepted Answer

To calculate the interest earned in the fourth year, we need to calculate the balance at the end of the third year, and then apply the interest rate for the fourth year.

After the first year, the balance becomes:

$25,000 * 1.07 = $26,750

After the second year, the balance becomes:

$26,750 * 1.06 = $28,406

After the third year, the balance becomes:

$28,406 * 1.03 = $29,236.18

To calculate the interest earned in the fourth year, we subtract the balance at the end of the third year from the balance at the end of the fourth year:

Interest earned = $29,236.18 * 0.03 = $877.08

Therefore, the answer is:

Answer: C
 The interest earned in the fourth year is $877.08.

A Single Deposit of $25,000 Is Made into an Account