Suppose you invest $1,000 today in an account that pays 5% interest, compounded annually. The balance in the account at the end of five years, if you make no withdrawals, is closest to:

Question

Quizplus · Accepted Answer

The balance in the account at the end of five years can be calculated using the formula for compound interest: A = P(1 + r)^n, where A is the amount of money accumulated after n years, including interest, P is the principal amount ($1,000), r is the annual interest rate (5% or 0.05), and n is the time the money is invested for in years (5). Plugging in the numbers: A = $1,000(1 + 0.05)^5 = $1,276.28, which is closest to $1,276.

Suppose You Invest $1,000 Today in an Account That Pays