Mr. Nailor invests $20,000 in a money market account at his local bank. He receives annual...

Mr. Nailor invests $20,000 in a money market account at his local bank. He receives annual interest of 6% for 5 years. How much return will his investment earn during this time period? Use Appendix A to calculate the answer.

Multiple Choice

$14,940
$6,760
$24,444
$26,760

Solutions

Expert Solution

$6,760

Step-1:Future value of investment

Future value of investment	=	Investment	x	Future value of 1
	=	$ 20,000	x	1.338
	=	$ 26,760

Working:

Future Value of 1	=	(1+i)^n		Where,
	=	(1+0.06)^5		i	Interest rate	6%
	=	1.338		n	time	5

Step-2:Return on investment earned

Return on investment	=	Future value of investment	-	Investment
	=	$ 26,760	-	$ 20,000
	=	$ 6,760

jeff jeffy answered 2 months ago

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