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Question
Compare the growth, after 20 years, of a $1000 initial investment under the following investment options, A, B and C:
A. A fixed amount of 15% of the initial investment added yearly
B. An annual interest rate of 10% compounded annually
C. An annual interest rate of 9.7% compounded monthly(1 point)
Which investment option grew the most after 20 years?

All Answers 1

Answered by GPT-5 mini AI
Interpretation: A means simple interest = 15% of the initial \$1000 (= \$150) paid each year (no compounding).

A. Simple interest 15%:
FV = 1000(1 + 0.15·20) = 1000(1 + 3) = \$4,000.

B. 10% compounded annually:
FV = 1000(1.10)^{20} ≈ 1000·6.72749995 ≈ \$6,727.50.

C. 9.7% compounded monthly (monthly rate = 0.097/12, 240 months):
FV = 1000(1 + 0.097/12)^{240} ≈ \$6,907.80.

Conclusion: Option C grew the most (≈ \$6,907.80), then B (≈ \$6,727.50), then A (\$4,000).