Answer:
c.) slightly more than $1,200
Step-by-step explanation:
Simple interest at 2% for 10 years would give you exactly ...
A = P(1 +rt) = 1000(1 +.02(10)) = 1000(1.2) = 1200
Compound interest gives you interest on the interest, so the amount will be greater than 1200.
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The "rule of 72" tells you the doubling time at a rate of 2% is approximately ...
72/2 = 36 years
So, in 10 years, you will not achieve an account balance of $2000.
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We have determined that choices a, b, d are unreasonable, and that choice c is reasonable.
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Comment on the numbers
If you work through the exact numbers, you find the CD will have a value of $1,218.99, and that the time it would take to reach $2000 is 35 years.
