For next year's vacation, the Phelps family is saving $100 each month in an account paying 7% annual interest, compounded monthly.How much will be available a year from now?
A)$1243.91
B)$1,229.26
C)$1,239.26
D)$1,248.56
E)$1,228.66

Question

Quizplus · Accepted Answer

Using the formula for compound interest, A=P(1+r/n)^(nt), where A is the amount, P is the principal (initial amount), r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the time in years, we have:

n = 12 (compounded monthly)
r = 7%, so r/n = 0.07/12
t = 1 (one year)
P = $100 (monthly deposit)

Using these values, we can solve for A:

A = $100(1+0.07/12)^(12*1)
A = $1,239.26

Therefore, the Phelps family will have $1,239.26 available a year from now. The closest answer choice is C.

For Next Year's Vacation, the Phelps Family Is Saving $100