Asked by jasmine badayos on May 13, 2024
Verified
If you invest $1,000 today at 8% interest compounded monthly, how much money will you have in 1 year?
A) $1,080
B) $1,083
C) $1,086
D) $1,090
Compounded Monthly
The method of determining interest that includes both the original principal sum and the interest that has previously been added up over past months.
Invest
Allocating resources, usually money, in the expectation of generating an income or profit.
Interest Rate
It is the amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.
- Utilize compound interest principles across different financial contexts.
Verified Answer
FK
Ferbis KamalaMay 15, 2024
Final Answer :
B
Explanation :
The formula for compound interest is:
A=P(1+r/n)^(nt)
where:
A = the future value of the investment
P = the present value of the investment
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years
Plug in the given values:
A = 1000(1+0.08/12)^(12*1)
A = $1,083.28
Since we are looking for the value after one year, we round to the nearest cent:
$1,083.28 ≈ $1,083
Therefore, the best choice is B, $1,083.
A=P(1+r/n)^(nt)
where:
A = the future value of the investment
P = the present value of the investment
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years
Plug in the given values:
A = 1000(1+0.08/12)^(12*1)
A = $1,083.28
Since we are looking for the value after one year, we round to the nearest cent:
$1,083.28 ≈ $1,083
Therefore, the best choice is B, $1,083.
Learning Objectives
- Utilize compound interest principles across different financial contexts.