Q5. Compound Interest
Question
Mark puts an initial deposit of $1,000 into his bank account and earns 7% interest compounded annually. Which of the following equations gives the total dollar amount, A, in the account after t years?
A) A = 1,000(1.07)t
B) A = 1,000(1.07t)
C) A = 1,000(.07t)
D) A = 1,000(.07)t
Explanation
Formula: A = P(1+r)t
Choice D) is correct. A = 1,000(1.07)t
Lesson
The formula for future value of compound interest is A = P(1+r)t
A = Future value
P = Initial deposit = 1,000
r = Interest rate
t = Time
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