Question

HCT Portal Take Test: Assignment 1Simple Compound interest Agents - MCL3103 Maracturing Technology Remaining Time: 1 hour, 16 minutes, 49 seconds. Question Completion Status: 10 20 3 40 50 60 7 8 99 100 Question 3 1 points Save Answer A total of Dh 34 500 was invested at an annual interest rate of 5.5% compounded annually. What will the value of the investment be after 2 years if there was a withdrawal of Dh 20 000 at the end of year 1? Dh 17 299.36 Dh 18 295 Dh 18 500 Dh 17 450.25 > Moving to another question will save this response. < < Question 3 of 10 > >>

Answer 1

The formula for valuing the investment using compound interest is given as A= P(1+ r/n)^nt. Where P is principal amount invested, r is the interest rate, n is the times amount is compounded and T is time.

Here, At the end of year one,

The value of investment will be P(1+ r)¹

That is, 34,500( 1+ 0.055)¹ => 34,500(1.055) => 36,397.5

Out of this amount 20,000 were withdrawn at the end of year one. Thus, new principal amount at the end of the year one is 36,397.5 - 20,000 = 16,397.5

With this principal, the value of investment at the end of year will be

16,397.5(1+0.055)¹ => 16,397.5*1.055 = 17,299.36

Thus, correct option is A.