Question

Ronnie opened a savings account and deposited 100.00 the account earns 8% interest compounded monthly if he wants to use the money to buy a new bicycle in 3 years how much will he be able to spend on the bike

Answer 1

The compound interest can be calculated as,

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

Here, P = 100, r = 0.08 (since 8%=0.08), n =1/12, t = 3

Therefore,

`A=100(1+(0.08)/((1)/(12)))^{(3)/(12)}=118.321`