Question

Ronnie opened a savings account and deposited 100.00 the account earns 8% interest compounded monthly 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

Answer 1

The compound interest can be calculated as,

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

Here, P = 100, r = 0.08 (since 8%=0.08), n =1/12, t = 3

Therefore,

$A=100(1+\frac{0.08}{\frac{1}{12}})^{\frac{3}{12}}=118.321$