Answer:
Sara will have US$ 2,251.02 in the bank after 4 years for her trip to Italy.
Explanation:
1. Let's review the data given to us for solving the question:
Investment of Sara during her 1st year of college = US$ 2,000
Duration of the investment = 4 years
Annual interest rate = 3%
2. Let's find the future value of this investment after 4 years, using the following formula:
FV = PV * (1 + r) ⁿ
PV = Investment of Sara during her 1st year of college = US$ 2,000
number of periods (n) = 4
rate (r) = 3% = 0.03
Replacing with the real values, we have:
FV = 2,000 * (1 + 0.03) ⁴
FV = 2,000 * (1.03) ⁴
FV = 2,000 * 1.12550881
FV = 2,251.02
Sara will have US$ 2,251.02 in the bank after 4 years for her trip to Italy.