If $1 were invested at 8 percent interest compounded annually, the : Problem Solving (PS)

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If $1 were invested at 8 percent interest compounded annually, the

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Joined: 04 Feb 2011

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If $1 were invested at 8 percent interest compounded annually, the [#permalink]

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Updated on: 25 May 2017, 12:28

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If $1 were invested at 8 percent interest compounded annually, the total value of investment, in dollars at the end of 6 years would be

A. $(1.8)^6$

B. $(1.08)^6$

C. $6(1.08)$

D. $1 + (0.08)^6$

E. $1 + 6(0.08)$

Spoiler: OA

Originally posted by Lolaergasheva on 08 Feb 2011, 03:48.
Last edited by Bunuel on 25 May 2017, 12:28, edited 1 time in total.

Renamed the topic and edited the question.

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Re: If $1 were invested at 8 percent interest compounded annually, the [#permalink]

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08 Feb 2011, 04:18

Q: What is the future value of $1 after 6 years; if it incurs compound interest every year once.

Formula:
$FV = PV(1+\frac{r}{n})^{nt}$

where,
FV= Future Value
PV= Present Value = $1
r= interest rate = 8% = 0.08
n=frequency of interest application to the value per year = 1(if compunded annually); it means that 8% interest is applied only once a year.
t=time (in years)=6

$FV = PV(1+\frac{r}{n})^{nt}$
$FV = 1(1+\frac{0.08}{1})^{1*6}$
$FV = 1(1+0.08)^6$
$FV = (1.08)^6$

Ans: "B"
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Re: If $1 were invested at 8 percent interest compounded annually, the [#permalink]

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17 May 2017, 05:04

If 1$ were invested at 8% interest compounded annually, the total value of the investment at the end of 6 years would be:

Amount = P $(1+\frac{r}{100})^n$

P = Principal, r = rate of interest, n = number of years.
P = $1, r = 8% , n = 6 years

Amount = 1$(1+\frac{8}{100})^6$ = 1$(\frac{108}{100})^6$ = 1$(1.08)^6$ = $(1.08)^6$
Answer B...

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Re: If $1 were invested at 8 percent interest compounded annually, the [#permalink]

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19 May 2017, 05:24

Lolaergasheva wrote:

If 1$ were invested at 8% interest compounded annually, the total value of the investment at the end of 6 years would be:

A. (1.8)^6
B. (1.08)^6
C. 6(1.08)
D. 1 + (0.08)^6
E. 1 + 6(0.08)

Using the compound interest formula, we have:

future value = present value(1 + rate/n)^nt

(in which n = number of compounding periods in a year and t = total number of years)

future value = 1(1 + 0.08/1)^(1)(6)

future value = (1.08)^6

Answer: B
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If $1 were invested at 8 percent interest compounded annually, the [#permalink]

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12 Oct 2017, 14:55

Top Contributor

Lolaergasheva wrote:

You can use this formula to calculate compound interest:
Final balance = P( 1 + r/c)^nc where:
P = the principal (the initial investment)
r = the annual interest rate expressed as a decimal
c = the number of times the interest is compounded each year
n = the number of years the investment collects interest

For this question, P = $1, r = 0.08, c = 1, n = 6
So, the FINAL BALANCE = 1( 1 + 0.08/1)^[(6)(1)]
= (1.08)^6
Answer:

Spoiler: ::

Cheers,
Brent
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Re: If $1 were invested at 8 percent interest compounded annually, the [#permalink]

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20 Oct 2018, 23:29

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