Question

Caleb and Rose deposit $1,000.00 into a savings account which earns 9% interestcompounded quarterly. 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

Since the account is under a compounded interest, we need to apply the following expression in order to determine the final amount:

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

Where A is the final amount, P is the initial principal, r is the interest rate, n is the number of times it get compounded in a year and t is the elapsed time.

`\begin{gathered} A=1000\cdot(1+(0.09)/(4))^(4\cdot2) \\ A=1000\cdot(1+0.0225)^8 \\ A=1000\cdot(1.0225)^8 \\ A=1000\cdot1.195 \\ A=1194.83 \end{gathered}`

They will be able to spend $1194.83