Level 2 · Intermediate ← Back to lesson

Compound Interest: Practice

12 multiple-choice questions, progressively harder.

Level 2 · Intermediate 0 / 12 answered

Question 1 of 12

1
You invest $1{,}000$ dollars at $5\%$ compounded annually for $3$ years. Using $1.05^3 = 1.157625$ , what is the balance?

Answer choices for question 1 A $1{,}150$ dollars B $1{,}157.00$ dollars C $1{,}102.50$ dollars D $1{,}157.63$ dollars
2
You invest $1{,}000$ dollars at $8\%$ compounded quarterly for $1$ year. Which is the correct setup?

Answer choices for question 2 A $1000(1 + 0.08)^4$ B $1000\left(1 + \frac{0.08}{4}\right)^{4}$ C $1000\left(1 + \frac{0.08}{4}\right)^{1}$ D $1000(1 + 0.08 \cdot 4)$
3
Evaluate that quarterly balance: $1{,}000$ dollars at $8\%$ compounded quarterly for $1$ year. Use $1.02^4 = 1.08243216$ .

Answer choices for question 3 A $1{,}080.00$ dollars B $1{,}081.60$ dollars C $1{,}082.43$ dollars D $1{,}083.00$ dollars
4
A sum is compounded monthly for $4$ years. In $A = P\left(1 + \frac{r}{n}\right)^{nt}$ , what is the exponent $nt$ ?

Answer choices for question 4 A $48$ B $16$ C $4$ D $12$
5
You invest $2{,}000$ dollars at $6\%$ compounded annually for $2$ years. Using $1.06^2 = 1.1236$ , what is the balance?

Answer choices for question 5 A $2{,}240$ dollars B $2{,}120$ dollars C $2{,}246.00$ dollars D $2{,}247.20$ dollars
6
Which formula gives the balance when a principal $P$ is compounded continuously at rate $r$ for $t$ years?

Answer choices for question 6 A $A = P(1+r)^t$ B $A = Pe^{rt}$ C $A = Pe^{r+t}$ D $A = Prt$
7
Compounded quarterly for $t$ years, how many compounding periods are there in total?

Answer choices for question 7 A $4t$ B $\frac{t}{4}$ C $4$ D $t$
8
As you compound more and more often (annually, then quarterly, then monthly, then daily), the balance after one year:

Answer choices for question 8 A falls toward zero B grows without any bound C rises toward a ceiling, the continuous amount D stays exactly the same
9
You invest $1{,}500$ dollars at $6\%$ compounded annually for $2$ years. Using $1.06^2 = 1.1236$ , what is the balance?

Answer choices for question 9 A $1{,}680.00$ dollars B $1{,}685.40$ dollars C $1{,}690.00$ dollars D $1{,}770.00$ dollars
10
To find the principal needed to reach a goal $A$ in $t$ years at annual rate $r$ , you compute:

Answer choices for question 10 A $P = A(1+r)^t$ B $P = A - rt$ C $P = \frac{A}{1 + rt}$ D $P = \frac{A}{(1+r)^t}$
11
You invest $1{,}000$ dollars at $4\%$ compounded quarterly for $1$ year. Using $1.01^4 = 1.04060401$ , what is the balance?

Answer choices for question 11 A $1{,}040.60$ dollars B $1{,}040.00$ dollars C $1{,}041.00$ dollars D $1{,}044.00$ dollars
12
You invest $250$ dollars at $8\%$ compounded annually for $2$ years. Using $1.08^2 = 1.1664$ , what is the balance?

Answer choices for question 12 A $290.00$ dollars B $291.00$ dollars C $291.60$ dollars D $294.00$ dollars

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