If you put $10 in a savings account at the beginning of each month for 10 years,how much money will be in the account at the end of the 10th year? Assume that the account earns 12% compounded monthly and round to the nearest $1.
A) $1,200
B) $2,323
C) $1,344
D) $3,727

Question

Quizplus · Accepted Answer

The correct answer is B because the account will earn interest on the interest that has already been earned. This is called compound interest. The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money in the account at the end of the term, P is the principal (the amount of money deposited each month), r is the annual interest rate, n is the number of times per year that the interest is compounded, and t is the number of years. In this case, P = $10, r = 12%, n = 12, and t = 10. Plugging these values into the formula, we get A = $10(1 + 0.12/12)^(12*10) = $2,323.44. Rounding to the nearest $1, the answer is $2,323.

If You Put $10 in a Savings Account at the Beginning