Question

John reads that the Fed has recently begun increasing its interest rates. Which of the following investments would lose value most quickly afterward?

Answer 1

You are given an investment of $5000 with a rate of 5.5% per year simple interest. You are required to get the total interest money after 5 years. Simple interest is the money that you can earn by investing initially some money. The percentage of the principal makes your investment grow. The simple interest formula is equal to the principal starting money multiplied by the interest rate and the time borrowed in years.

 

F = P (1+rn)

F = ($5000)[1+(0.055)(5)]

F = $6375