Answered: If you invest $150,000 at an interest…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter6: Saving And Investing

Section6.1: Why Save?

Problem 6R

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If you invest $150,000 at an interest rate of 10% compounded annually, what is your total balance after 2 years?

Expert Solution

Step 1

The interest rate is the income earned by the investment in the economy. When the money is invested in the bank, the bank provides the interest rate to the investors or the depositors. Thus, it is the income generated by the deposits. There is a direct relation between the interest rate and savings. When the interest rate increases, people will save more and vice versa. This is due to the fact that the interest rate hike makes the income from savings higher and vice versa.

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