Question

30. You have purchased a guaranteed investment contract() from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years. If you pay $10,000 for the GIC today and receive no interest along the way, you will get in 6 years (to the nearest dollar). (C) $13,401 $13,676 $12,565 $13,000

Answer 1

=> It is given that the amount paid is $10,000 and invested for 6 years, annual interest rate is given as 5% and compounded yearly.

=> Since you have not received any interest along the way We can find amount received in 6 years by using the compound interest formula:

, where A is the final amount received, P is the initial amount paid, r is the annual interest rate, n is the number of times compounded in a time period and t is the time period

A=P*(1+4)*** n

=> Just plug the values into the formula to find the answer

A= 10,000 * (1 +0.05) = 10,000 * 1.3401 = 13, 401

=> Therefore the answer is $13,401