Question

Jessica invested $2,000 today in an investment that pays 6.5 percent annual interest. Which one of the following statements is correct, assuming all interest is reinvested? Group of answer choices She will earn an increasing amount of interest each and every year even if she should decide to withdraw the interest annually rather than reinvesting the interest. Her interest for Year 2 will be equal to $2,000 ×.065 × 2. She could have the same future value and invest less than $2,000 initially if she could earn more than 6.5 percent interest. She will be earning simple interest. She will earn the same amount of interest each year.

Answer 1

Answer:

If the interest rate is higher, to earn the same amount, she will need to invest a lesser amount of money.

Explanation:

Giving the following information:

Jessica invested $2,000 today in an investment that pays 6.5 percent annual interest.

The correct answer is:

She could have the same future value and invest less than $2,000 initially if she could earn more than 6.5 percent interest.

If the interest rate is higher, to earn the same amount, she will need to invest a lesser amount of money.