Mr. Naylor invests $19,000 in a money market account at his local bank. It earns 12% annual interest for 11 years. During this period his investment will earn a return of $47,101. Here option D is the correct answer.
Future Value (Compounding Purpose) - Single Cash Flow
Return Earned = PV × [tex](1+ R)^{n}[/tex] – PV
where,
PV = Present Value of Investment = Amount Deposited = $ 19000
R = Rate of Interest = 12%
n = Number of years = 11 years
The money gained or lost on an investment over time is referred to as a return, often known as a financial return. The nominal change in an investment's dollar value over time can be used to describe a return.
Return Earned = 19000 × [tex](1.12)^{11}[/tex] - 19000
Using Table for Future Value Factor of 12% at n = 11,
Return Earned = (19000 × 3.479) - 19000
Return Earned = 66101 - 19000
Return Earned = 47101
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