You believe in the power of compounding and decide to save $1 per day by avoiding the purchase of a soda.You deposit the $1 at the end of each day in a bank account that pays 8% interest compounded daily.You are going to take a trip in 20 years with the money you have accumulated.How much money will you have in 20 years,assuming 365 days per year?
A) $7,500
B) $12,438
C) $18,032
D) $22,456

Question

Quizplus · Accepted Answer

The formula for compound interest is:

A = P(1 + r/n)^(nt)

Where:

A = Final amount
P = Principal amount (initial deposit)
r = Annual interest rate (as a decimal)
n = Number of times the interest is compounded per year
t = Number of years

In this case P = $1, r = 8%, n = 365 (compounded daily), and t = 20.

So plugging in the values we get:

A = 1(1 + 0.08/365)^(365*20)
A = $18,032.05

Therefore, after 20 years of saving $1 per day at 8% interest compounded daily, you will have accumulated $18,032. Answer is C).

You Believe in the Power of Compounding and Decide to Save