Question

Lindsey opened a savings account and deposited $700.00. The account earns 10% interest, compounded annually. 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

After 3 years, the savings account with a $700 initial deposit and an annual interest rate of 10% compounded annually will grow to $931.70, which is the amount Lindsey can spend on a bike.

Step-by-step explanation:

The student is asking about compound interest, which can be calculated using the formula A = P(1 + r)^t, where P is the principal amount ($700), r is the annual interest rate (10% or 0.10), and t is the time the money is invested (3 years). Lindsay wants to know how much she will be able to spend on a new bicycle after 3 years.

Let's calculate:

• A = 700(1 + 0.10)^3
• A = 700(1.10)^3
• A = 700(1.331)
• A = $931.70

After 3 years, Lindsey will be able to spend $931.70 on her new bicycle.