Bunuel wrote:
At the beginning of January 2003, Elizabeth invested money in an account that collected interest, compounding more frequently than a year. Assume the annual percentage rate of interest remained constant. What is the total amount she has invested after seven years?
(1) her initial investment was $20,000
(2) the account accrued 7% annual interest
Kudos for a correct solution.
I got this correct, but for another reason. Yes you have to know how often the money invested compounds, but I have an issue with the question wording. When you say, "
What is the total amount she has invested after seven years", you are simply asking "How much money has she deposited in the account over the course of the seven years?" You know she deposited $20,000 initially, but did she ever deposit more than that? You need to know yes or no, and if yes, what the deposit amounts were and at what time the money was deposited into the account so that you could compute the end balance of the account after 7 years.
If the question had been, "What is the total amount of money that had
vested after seven years", then the question would be valid because it would simply be asking "How much total money would be in the account after 7 years?" Ie, "What is the balance after 7 years?"
Does anyone else agree that there is an issue with the wording?