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Jose received $250 for his birthday from his family. He wishes to buy a motorcycle and decides to use his birthday money towards it. He'd like to have a bigger down payment so he invests his money in a saving account that pays 5% per year compounded quarterly. If Jose purchases the motorcycle in 2 years, how much will he have available towards the down payment for his motorcycle?

User Juru
by
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1 Answer

1 vote

Answer:

He will have $276.10 available towards the down payment for his motorcycle

Explanation:

The compound interest formula is given by:


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

Where A is the amount of money, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per unit t and t is the time the money is invested or borrowed for.

In this problem, we have that:


P = 250, t = 2, r = 0.05

Compounded quarterly, so n = 12/4 = 3.

We have to find A.


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


A = 250(1 + (0.05)/(3))^(3*2)


A = 276.1

He will have $276.10 available towards the down payment for his motorcycle

User Snapcrack
by
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