Upon starting his first job after graduation, Jon has completed the necessary paperwork to set up direct deposit of his paycheck into his savings account. After taxes, medical benefits, and retirement account contributions have been taken out of John's gross salary, he is left with a direct deposit of $4000 at the end of each month. If John started with no other savings in his account, how much will John have in his savings account at the end of 12 months if he is able to earn an annual interest rate of 3%, with interest being compounded monthly?
A) $48, 665.53
B) $48,787.19
C) $56,768.12
D) $58,471.16

Question

Quizplus · Accepted Answer

The correct answer is A.The formula for compound interest is A = P(1 + r/n)^(nt), where A is the final amount, P is the principal (initial amount), r is the annual interest rate, n is the number of times per year that the interest is compounded, and t is the number of years.In this case, P = $4000, r = 3%, n = 12 (since the interest is compounded monthly), and t = 1. Plugging these values into the formula, we get A = $4000(1 + 0.03/12)^(12*1) = $48,665.53.

Upon Starting His First Job After Graduation, Jon Has Completed