The correct answer is D. P705.42.
The formula for compound interest is $A = P(1 + r/n)^nt$, where $A$ is the final amount, $P$ is the principal amount, $r$ is the interest rate, $n$ is the number of times interest is compounded per year, and $t$ is the number of years.
In this case, $P = 1000$, $r = 0.05$, $n = 1$, and $t = 16$. Substituting these values into the formula, we get $A = 1000(1 + 0.05/1)^{16} = 705.42$.
Option A is incorrect because it is the amount of money that would be left if the principal were not withdrawn after eight years. Option B is incorrect because it is the amount of interest that would be earned on the principal over eight years. Option C is incorrect because it is the amount of money that would be left if the interest were not compounded.