Question

Kinsley opened a savings account and deposited 600.00 the account earns 5%interest compounded quarterly if she wants to use the money to buy a new bicycle in 3 years how much will she be able to spend on the bike

Answer 1

P : Principal amount deposited : $600

r : interest rate : 5 % = 0.05 ( decimal form)

n : number of compounding periods in a year : 4 (4 times in a year)

t : years

Apply compound interest formula:

A= P (1+r/n)^nt

Replace by the values given:

A = 600 (1+0.05/4)^(4.3)

A = 600 ( 1.0125) ^12

A =$ 696.45