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Phillippe invested $1,000 ten years ago and expected to have $1,800 today He has neither added nor withdrawn any money since his initial investment. All interest was reinvested and compounded annually. As it turns out, he only has $1,680 in his account today. Which one of the following must be true?

A) He earned simple interest rather than compound interest.
B) He earned a lower interest rate than he expected.
C) He did not earn any interest on interest as he expected.
D) He ignored the Rule of 72 which caused his account to decrease in value.
E) The future value interest factor turned out to be higher than he expected.

Respuesta :

Answer:

B. He earned a lower interest rate than he expected.

Explanation:

Phillippe's expectation from his investment of $1,000 ten years ago was shortened to $1,680, instead of $1,800. $1,800 was expected based on the interest rate he was given. But, unfortunately, he earned a lower interest rate than he expected. This made him have $680 more on his investment of $1,000 after 10 years.

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