Question

Big Money Bank has an offer for new customers: if you deposit $5,000 in a savings account, you will earn 6.5% simple interest over the first 10 years. How much will be in the account after the 10-year period?

Answer 1

Answer:

$9,386

Step-by-step explanation:

If you invested $10,000 in a mutual fund and the fund earned a 7% return for the year, you’d gain about $700, and your investment would be worth $10,700. If you got an average 7% return the following year, your investment would then be worth about $11,500.

Over the years, your investment can really grow: If you kept that money in a retirement account over 30 years and earned that average 7% return, for example, your $10,000 would grow to more than $76,000.

In reality, investment returns will vary year to year and even day to day. In the short term, riskier investments such as stocks or stock mutual funds may actually lose value. But over a long time horizon, history shows that a diversified growth portfolio can return an average of 6% to 7% annually. Investment returns are typically shown at an annual rate of return.