Question

Ronnie and Debbie deposit 500.00 into a savings account which earns 13% interest compounded monthly they want to use the money in the account to go on a trip in 3 years how much will they be able to spend

Answer 1

To calculate the compound interest you have to use the following formula

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

Where

A: accrued amount → is the principal amount + interest acquired

P: principal amount

t: time in years

n: number of compounding periods

r: interest rate, expressed as a decimal number

For this exercise

P= $500.00

r=0.13

t=3years

n→ is a monthly compound, which means that there are 12 compounding periods per year: 12*3=36 in 3 years there will be 36 periods

The total amount is

`\begin{gathered} A=500(1+(0.13)/(36))^(3\cdot36) \\ A=500((3613)/(3600))^(108) \\ A=737.97 \end{gathered}`