If you put $6000 in a savings account that yields a 1% rate of interest compounded daily, what will the investment be worth at the end of one year?
A)$6060.00
B)$6060.30
C)$6006.03
D)$6760.95

Question

Quizplus · Accepted Answer

The formula to use for daily compounding is:
A = P(1 + r/n)^(n*t)
where:
A = the amount at the end of the time period
P = the principal (initial amount)
r = the annual interest rate (as a decimal)
n = the number of times interest is compounded per year
t = the time period (in years)

For this problem:
P = $6000
r = 0.01
n = 365 (daily compounding)
t = 1 year

A = 6000(1 + 0.01/365)^(365*1)
A = $6060.30

Therefore, the best choice is B, as it is the only one that matches the calculated value.

If You Put $6000 in a Savings Account That Yields