Question

Lacy opened a savings account and deposited $100. The account earns 6% interest compounded monthly if she wants to use the money to buy a new bicycle in two years how much will she be able to spend on the bike

Answer 1

Future Value= $112.72

Explanation:

Giving the following information:

Initial deposit (PV)= $100

Number of periods (n)= 2*12= 24 months

Interest rate (i)= 0.06/12= 0.005

To calculate the future value (FV), we need to use the following formula:

FV= PV*(1 + i)^n

FV= 100*(1.005^24)

FV= $112.72