Ben invest $10,000 at a rate of interest of 5 percent for 40 years. Which of the following statements about the return on the investment is true?

a. Ben will receive a significant amount at the end of the investment period, due to the feature of compounding.

Multiple choice options

a. Ben will receive a significant amount at the end of the investment period, due to the feature of compounding.

b. Ben will receive no interest on his investment at the end of the investment period.

c. Ben will receive an interest of $5,000 at the end of ten years.

d. Ben will receive more money at 3 percent rate of interest instead of the existing rate.

e. Ben will receive more money at the end of 30 years compared to the money received at the end of 40 years.

Explanation:

Ben will be earning 5% of his investment of $10,000 every year for 40 years.

At the end of every year, the 5% earned will be added to $10,000. It means the principal and interest will increase at the end of every year. After 40 years, Ben will receive a huge amount, as indicated below.

The formula is A= p x ( 1 x r)^n

A = $10,000 x ( 1+0.05)^40

A = $10,000 x (1.05)^40

A= $10,000 x 7.039988

A= 70,399.88

A=$70,400

Ben invest $10,000 but will receive $70,400 after 40 years

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