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Updated on: 25 May 2017, 13:28
2
00:00

Difficulty:

5% (low)

Question Stats:

82% (00:26) correct 18% (00:42) wrong based on 132 sessions

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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. $$1 + 6(0.08)$$ Originally posted by Lolaergasheva on 08 Feb 2011, 04:48. Last edited by Bunuel on 25 May 2017, 13:28, edited 1 time in total. Renamed the topic and edited the question. Math Forum Moderator Joined: 20 Dec 2010 Posts: 1899 Re: If$1 were invested at 8 percent interest compounded annually, the  [#permalink]

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08 Feb 2011, 05:18
1
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 $1 were invested at 8 percent interest compounded annually, the [#permalink] ### Show Tags 17 May 2017, 06:04 1 If 1$ 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... _________________ Kindly press "+1 Kudos" to appreciate Target Test Prep Representative Status: Founder & CEO Affiliations: Target Test Prep Joined: 14 Oct 2015 Posts: 2973 Location: United States (CA) Re: If$1 were invested at 8 percent interest compounded annually, the  [#permalink]

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19 May 2017, 06:24
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 _________________ Scott Woodbury-Stewart Founder and CEO GMAT Quant Self-Study Course 500+ lessons 3000+ practice problems 800+ HD solutions CEO Joined: 12 Sep 2015 Posts: 2635 Location: Canada If$1 were invested at 8 percent interest compounded annually, the  [#permalink]

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12 Oct 2017, 15:55
Top Contributor
Lolaergasheva wrote:
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. $$1 + 6(0.08)$$ 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

Cheers,
Brent
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