An investor puts $2,500 into a life insurance policy that pays 8.5% simple annual interest. If no additional investment is made into the policy, how much accumulated interest should the investor expect at the end of 10 years?
2125.00
To calculate the accumulated interest at the end of 10 years, we can use the formula for simple interest:
Simple Interest = Principal * Rate * Time
In this case, the principal is $2,500, the rate is 8.5% or 0.085, and the time is 10 years. Plugging in these values, we can calculate the accumulated interest:
Simple Interest = $2,500 * 0.085 * 10
= $2,125
Therefore, the investor should expect $2,125 accumulated interest at the end of 10 years.
To calculate the accumulated interest on the life insurance policy, you need to multiply the initial investment by the interest rate and the duration of the investment.
Given:
Principal amount (initial investment) = $2,500
Rate of interest = 8.5% per year
Duration = 10 years
To calculate the accumulated interest, follow these steps:
Step 1: Convert the interest rate to a decimal by dividing it by 100:
Interest rate = 8.5% ÷ 100 = 0.085
Step 2: Multiply the initial investment by the interest rate to get the annual interest:
Annual interest = $2,500 × 0.085 = $212.50
Step 3: Multiply the annual interest by the duration (number of years) to get the accumulated interest over 10 years:
Accumulated interest = Annual interest × Duration = $212.50 × 10 = $2,125
Therefore, the investor should expect $2,125 as the accumulated interest at the end of 10 years.