You deposited $1,000 in a savings account that pays 8 percent interest,compounded quarterly,planning to use it to finish your last year in college.Eighteen months later,you decide to go to the Rocky Mountains to become a ski instructor rather than continue in school,so you close out your account.How much money will you receive?

Question

Quizplus · Accepted Answer

The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. In this case, P = $1,000, r = 0.08 (8%), n = 4 (since the interest is compounded quarterly), and t = 1.5 years (18 months). Plugging these values into the formula gives A = 1000(1 + 0.08/4)^(4*1.5) = $1,126. Therefore, the correct answer is $1,126.

You Deposited $1,000 in a Savings Account That Pays 8