You plan to save $1,400 for the next four years, beginning now, to pay for a vacation. If you can invest it at 6 percent annually, how much will you have at the end of four years? Round to the nearest dollar.

Question

Quizplus · Accepted Answer

Using the formula for compound interest: 
A = P(1 + r/n)^(nt)
where A is the amount at the end of the investment period, P is the principal (initial amount invested), r is the annual interest rate as a decimal, n is the number of times interest is compounded per year, and t is the number of years. 
Substituting the given values: 
P = $1,400
r = 0.06
n = 1 (compounded annually)
t = 4
A = $1,400(1 + 0.06/1)^(1*4) = $1,400(1.262476) = $1,766.466
Rounding to the nearest dollar gives $1,766. Therefore, choice D is the best option as it is the closest to $1,766.

You Plan to Save $1,400 for the Next Four Years