VeritasPrepKarishma wrote:

Bunuel wrote:

If $2.00 were invested at 4% annual interest at the end of 8 years the total value of investment would be

A. $1.63

B. $2.08

C. $2.64

D. $2.74

E. $2.80

The question doesn't say whether it is simple interest or compound. Since nothing is mentioned and the time period is 8 years, I am inclined to assume simple interest and move on.

A = P (1 + RT/100) = 2 (1 + 4*8/100) = $2.64

Answer (C)

Don't you think, That would be a very specific assumption???

In general case, If nothing is mentioned about the interest calculation whether it's SIMPLE INTEREST or COMPOUND INTEREST then the normal understanding goes with COMPOUND Interest as Simple interest has disappeared from practicality

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