A 5-year investment note offers a 10% return on purchase, and a compounding 5% for each year after the first. If there is a $500 penalty for early redemption, and the note is redeemed for $6430 after the second year, what was the original purchase price? Choose one
A) $ 6,000
B) $ 6,048
C) $ 6,100
D) $ 6,150
E) $ 6,200
Since the note was redeemed after 2 years, so a penalty of $500 has to be submitted. So the amount that is redeemed after 6430 is after the deduction of $500.   Hence the amount after being compounded is 6930.   Let the initial amount be P.   After the return, the amount becomes 1.1P.   Now use this 1.1P as the principle in the compound interest formula to get the amount 6930.   A=1.1P(1+5/100)A=1.1P(1+5/100)   where A=6930.   Therefore, use   6930=1.1P(1+5/100)6930=1.1P(1+5/100) to get P as $6000.   $ 6,000NSWER:$ 6,000
<result>A</result>
A 5-year investment note offers a 10% return on purchase, and a compounding 5% for each year after the first. If there is a $500 penalty for early redemption, and the note is redeemed for $6430 after the second year, what was the original purchase price?