An investor puts $2,500 into a life insurance policy that pays 8.5% simple annual interest. If no additional investment is made into the policy, how much accumulated interest should the investor expect at the end of 10 years?

Question

An investor puts $2,500 into a life insurance policy that pays 8.5% simple annual interest. If no additional investment is made into the policy, how much accumulated interest should the investor expect at the end of 10 years?


$21,250.00

$2,125.00

$212.50

$21.25

Answer 1

To calculate the accumulated interest at the end of 10 years, we can use the formula for simple interest:

Simple Interest = Principal x Rate x Time

Given:
Principal = $2,500
Rate = 8.5%
Time = 10 years

Plugging in the values:

Simple Interest = $2,500 x 0.085 x 10
Simple Interest = $2,500 x 0.85
Simple Interest = $2,125

Therefore, the investor should expect $2,125 in accumulated interest at the end of 10 years.

The closest answer is $2,125.00.