Question

Austin and carly despoit 500.00 into a savings account which earns 1% interest compounded monthly they want to use the money in the account to go on a trip in 2 years how much will they be able to spend

Answer 1

EXPLANATION

Let's see the facts:

Austin and Carly deposit: $500

Interest rate= 1%

Compounding period = monthly

Total number of years = 2

Given the Compounding Interest Rate formula:

`\text{Compound amount = P (1+r/n)\textasciicircum{}nt}`

n is the compounding period

t is the number of years

r is te interest rate in decimal form

Replacing the given values will give us:

`\text{Compound amount = 500 (1+}(0.01)/(12))^(12\cdot2)`

Solving the power:

`\text{Compound amount = 500 }\cdot1.020192843`
`\text{Compound amount = \$510.09}`

Answer: Austin and Carly will be able to spend $510.09.