Suppose a new business makes a $1,000 profit in its first month and has its profit increase by 9% each month for the next 2 years. How much profit will it earn in its first year? Round your answer to the nearest cent.

Question

Suppose a new business makes a $1,000 profit in its first month and has its profit increase by 9% each month for the next 2 years. How much profit will it earn in its first year? Round your answer to the nearest cent. ​

Quizplus · Accepted Answer

To calculate the profit earned in the first year, we need to first calculate the profit earned in the first 12 months.

Profit earned in the first month = $1,000

Profit earned in the second month = $1,000 + 9% of $1,000 = $1,090

Profit earned in the third month = $1,090 + 9% of $1,090 = $1,188.10

Continuing this pattern for 12 months, we get:

Profit earned in the first year = $1,000 + $1,090 + $1,188.10 + ... + (9% of profit earned in the 11th month) 
= $20,140.72

Therefore, the best choice is D.

Suppose a New Business Makes a $1,000 Profit in Its