T2-27 Multiple Choice A. Martin earned simple interest rather than compound inte

Question

T2-27 Multiple Choice

A. Martin earned simple interest rather than compound interest.
B. Martin earned a lower interest rate than he expected.
C. Martin did not earn any interest on interest as he expected.
D. Martin earned a higher interest rate than he expected.
E. The future value interest factor turned out to be higher than Martin expected.

Martin invested $1,000 six years ago and expected to have $1,500 today. He has not added or withdrawn any money from this account since his initial investment. All interest was reinvested in the account. As it turns out, Martin only has $1,420 in his account today. Which one of the following must be true?

Explanation / Answer

B. Martin earned a lower interest rate than he expected

since martin didnot withdrew any money from his account since investmenta and reinvested all the interest, he is getting compouded payment, the difference in expected future money due to deviation in the interest expected and actual

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