Question

Erin opened a savings account and deposited $300,00. The account earns 10% Interest,compounded monthly. If she wants to use the money to buy a new bicycle in 3 years, howmuch will she be able to spend on the bike?

Answer 1

Since the money is deposited on an account that gets compounded monthly, we need to use the following expression:

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

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

`\begin{gathered} A=300\cdot(1+(0.1)/(12))^(12\cdot3) \\ A=300\cdot(1+0.00833)^(36)_{} \\ A=300\cdot(1.00833)^(36) \\ A=300\cdot1.34802 \\ A=404.41 \end{gathered}`

Erin will be able to spend $404.41 on the bike.