You invest $10 000 in a savings account that pays interest of 8% compounded monthly. What is the value of your account after 14 months?
A) $10 970.88
B) $10 904.88
C) $10 074.88
D) $10 004.88
E) $10 974.88

Question

Quizplus · Accepted Answer

The value of the investment after 14 months can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($10,000), r is the annual interest rate (8% or 0.08), n is the number of times that interest is compounded per year (monthly compounding means n=12), and t is the time the money is invested for in years (14 months is approximately 1.1667 years). Plugging in the values: A = 10000(1 + 0.08/12)^(12*1.1667) ≈ $10,974.88.

You Invest $10 000 in a Savings Account That Pays