Mathematics ACT Aspire Practice Test 2025 - Free Practice Questions and Study Guide

Question: 1 / 400

How much will $1000 grow to in one year if it earns 5% interest compounded annually?

$1050

To determine how much $1000 grows in one year with an interest rate of 5% compounded annually, we use the formula for compound interest:

A = P(1 + r)^t

Where:

- $ A $ is the amount of money accumulated after n years, including interest.

- $ P $ is the principal amount (the initial amount of money).

- $ r $ is the annual interest rate (decimal).

- $ t $ is the number of years the money is invested or borrowed for.

In this scenario:

- $ P = 1000 $

- $ r = 0.05 $ (5% as a decimal)

- $ t = 1 $

Plugging the values into the formula:

A = 1000(1 + 0.05)^1

This simplifies to:

A = 1000(1.05)

Calculating that gives:

A = 1000 \times 1.05 = 1050

Thus, after one year, the original $1000 will grow to $1050 when earning 5% interest compounded annually. This value reflects the

$1000

$1100

$1200

Report this question

Get the latest from Examzify