Over time,the future value of $1000 invested today at 6 per cent,compounded annually,will increase by:
A)a constant annual amount given the interest on interest effect
B)a constant annual amount given that interest is compounded annually
C)a decreasing annual amount due to the compounding effect
D)an increasing annual amount given the compound interest effect
E)an increasing annual amount due to the effects of the simple interest rate

Question

Quizplus · Accepted Answer

The future value of $1000 invested today at 6% compounded annually will increase by an increasing annual amount given the compound interest effect. This means that the interest earned in each year is added to the principal, and the total amount is then used to calculate interest in the next year. As a result, the amount of interest earned each year will increase over time, leading to an increasing annual amount of growth.

Over Time,the Future Value of $1000 Invested Today at 6