Question

Danny opened a savings account and deposited $100.00. The account earns 2% interest,

compounded annually. 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?
nt
P(1 + 1)^²₁. where A is the balance (final amount), P is the principal
Use the formula A = P 1 +
(starting amount), r is the interest rate expressed as a decimal, n is the number of times per
year that the interest is compounded, and t is the time in years.
Round your answer to the nearest cent.

Answer 1

Answer: f = p * (1 + r) ^ n

f is the future value.

p is the present value.

r is the interest rate per time period.

n is the number of time periods.

time periods are months.

rate is the percent divided by 100.

p = 100

r = 6% per year / 12 = .5% per month / 100 = .005 per month.

n = 2 years * 12 = 24 months.

formula becomes f = 100 * (1 + .005) ^ 24

solve for f to get:

f = 112.7159776 = 112.72

that's how much Danny will be able to spend on the bike in 2 years.

Explanation: