Question

Judith opened a savings account and deposited $300.00. The account earns 6% interest, compounded annually. If she wants to use the money to buy a new bicycle in 3 years, how much will she be able to spend on the bike? nt Use the formula A = P 1 + P11+ where A is the balance (final amount), P is the principal (starting 1 n 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

The formula to calculate the final amount on an account that compounds interest is

$A=P(1-\frac{r}{n})^{nt}$

A is the accrued amount

P is the principal amount

r is the interest rate expressed as a decimal value

t is the time period

n is the number of copounding periods, this saving's account compounds annualy which means that there is one compound period per year

For

P= $300

r=6/100=0.06

t=3 years

n (1/year) →3*1=3

$\begin{gathered} A=300(1+\frac{0.06}{3})^{3\cdot3} \\ A=358.53 \end{gathered}$

The final amount after 3 years will be $358.53