Question

On January 1, 2009, $500,000 is deposited in fund X and $50,000 is deposited in fund Y. No previous deposits exist. Fund X earns compound interest at an effective rate will be ?

Answer 1

To determine the effective annual rate of interest for fund X, we need to know the rate at which it earns compound interest. The question does not provide this information, so we cannot calculate the effective rate. However, we can calculate the future value of the deposits in each fund separately.

Step-by-step explanation:

To determine the effective annual rate of interest for fund X, we need to know the rate at which it earns compound interest. The question does not provide this information, so we cannot calculate the effective rate.

However, we can calculate the future value of the deposits in each fund separately. Assuming the interest is compounded annually, the future value of the $500,000 deposit in fund X after a certain number of years can be calculated using the formula:

1. Future Value = Principal * (1 + Interest Rate)^Number of Years
2. Future Value of fund X = $500,000 * (1 + Interest Rate)^Number of Years

Similarly, the future value of the $50,000 deposit in fund Y can be calculated using the same formula:

1. Future Value of fund Y = $50,000 * (1 + Interest Rate)^Number of Years