Bradley Snapp has deposited $6,000 in a guaranteed investment account with a promised rate of 6% compounded annually. He plans to leave it there for 4 full years when he will make a down payment on a car after graduation. How much of a down payment will he be able to make?

Question

Quizplus · Accepted Answer

We can use the formula for compound interest to find the balance after 4 years:
A = P(1 + r/n)^(nt)
Where:
P = 6,000 (starting principal)
r = 6% (annual interest rate)
n = 1 (compounded annually)
t = 4 (number of years)

A = 6,000(1 + 0.06/1)^(1*4)
A = 6,000(1.06)^4
A = 7,574.86

Therefore, Bradley will have $7,574.86 for his down payment, which is option D.

Bradley Snapp Has Deposited $6,000 in a Guaranteed Investment Account