Suppose you invest $2,000 today, compounded monthly, with an annual interest rate of 7.50%. What is your investment worth in one year?
A) $2,150.00
B) $2,152.81
C) $2,155.27
D) $2,154.77
Answer: C
Explanation: C) With PV = $2,000, APR = 7.50%, C/Y = 12, periodic interest rate = r = 0.00625, we begin by taking (1 + periodic rate) to the power of C/Y. Doing this gives: (1.00625)12 = 1.077633. Multiplying this number by PV gives $2,155.27.
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