Formula for Compound Interest: A = P(1 + r/n)^n*t
A = final amount (aka your answer)
P = initial amount (what you begin with)
r = interest rate (as a decimal)
n = number of times per year that the money is compounded
ex. annually: n = 1; semi-annually: n = 2; quarterly: n = 4
t = time in years
Explanation:
1. A = 800(1 + .08/1)^1
2. Because the interest rate is compounded only once a year, the problem becomes very simple and you can get rid of the exponent 1, as this will not affect the answer because any value to the power of 1 is itself. Additionally, you do not have to divide 0.08 by 1, because anything divided by 1 is itself as well.
3. A = 800(1.08), multiply the values using a calculator for accurate answers
4. A = $864
Answer: Edwin will earn exactly $64 in one year with an 8% interest rate, giving him a total of $864