You plan to save $1,400 for the next four years, beginning now, to pay for a vacation. If you can invest it at 6 percent, how much will you have at the end of four years? Round to the nearest dollar.

Question

Quizplus · Accepted Answer

Using the compound interest formula: A = P(1+r/n)^(nt), 
where A is the amount at the end of the investment period, 
P is the initial investment (in this case, $1,400), r is the annual interest rate (6% or 0.06), 
n is the number of times interest is compounded per year (assuming annually), 
and t is the number of years (4).
So, A = 1400(1+0.06/1)^(1*4) = $1,836.82. 
Rounding to the nearest dollar gives the answer D: $6,492.

You Plan to Save $1,400 for the Next Four Years