If you invest $1,000 today at 8% interest compounded monthly, how much money will you have in 1 year?
A)$1,080
B)$1,083
C)$1,086
D)$1,090

Question

Quizplus · Accepted Answer

The formula for compound interest is:
A=P(1+r/n)^(nt)
where:
A = the future value of the investment
P = the present value of the investment
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years

Plug in the given values:
A = 1000(1+0.08/12)^(12*1)
A = $1,083.28

Since we are looking for the value after one year, we round to the nearest cent: 
$1,083.28 ≈ $1,083

Therefore, the best choice is B, $1,083.

If You Invest $1,000 Today at 8% Interest Compounded Monthly