You want to save money to buy a new computer system. If you deposit $100 a month for a year at an APR of 6% compounded monthly, how much money will you have saved after a year?

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we can find the amount saved after a year:
A = P(1 + r/n)^(nt)
where A is the amount saved, P is the monthly deposit amount, r is the annual interest rate, n is the number of times the interest is compounded in a year, and t is the amount of time in years.
In this case, P = $100, r = 6%, n = 12 (compounded monthly), and t = 1 (year):
A = 100(1 + 0.06/12)^(12*1) = $1233.56
Therefore, the best choice is B.

You Want to Save Money to Buy a New Computer