Answer:
Samantha could have deposited less money and still had $5,600 in five years if she could have earned 5.5 percent interest
Explanation:
Giving the following information:
Her money will earn 5 percent interest, compounded annually. After five years, her savings account will be worth $5,600.
First, we will calculate the original deposit. Then, we will tackle each statement and find the true one.
PV= FV/(1+i)^n
PV= 5,600/ (1.05^5)= $4,387.75
a. Samantha deposited more than $5,600 this morning. False, we just prove that she deposit less than 5,600
b. Samantha could have deposited less money and still had $5,600 in five years if she could have earned 5.5 percent interest. <u>True. The higher the interest rate, in the same period the higher the ending value or lower the present value. </u>
c. The present value of Samantha's account is $5,600. False, the final value is $5,600.
d. Samantha would have had to deposit more money to have $5,600 in five years if she could have earned 6 percent interest. False, she would have to deposit less than $5,600
e. Samantha will earn an equal amount of interest every year for the next five years. False. Because interest gets capitalized, each year the interest earned is higher.
