If your grandmother gives you a high school graduation gift of $5,000 and you do not spend the gift, but invest it to earn an interest rate of 6% per year compounded annually, upon your graduation from college after exactly four years your gift will be worth approximately

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we have:
A = P(1 + r/n)^(nt)
where:
A = the amount after t years
P = the principal amount (in this case, $5,000)
r = the annual interest rate (6%)
n = the number of times the interest is compounded per year (1, since it's annually)
t = the number of years (4)

Plugging in the values, we get:
A = 5000(1 + 0.06/1)^(1*4)
A = $6,311.51

So, the answer is C, approximately $6,312.

If Your Grandmother Gives You a High School Graduation Gift