Question

Doug and Myra deposit $600.00 into a savings account which earns 5% interest compounded monthly. They want to use the money in the account to go on a trip in 2 years. How much will they be able to spend? . n Use the formula A = P 1 + where A is the balance (final amount), P is the principal (starting mount), r is the interest rate expressed as a decimal, n is the number of times per year that the terest is compounded, and t is the time in years. und your answer to the nearest cent.

Answer 1

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

Given:

P = $ 600.00

r = 5% = 0.05

n = 12 (monthly)

t = 2 years

Required:

balance (final amount), A = ?

Solution:

$\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ A=600(1+\frac{0.05}{12})^{12^{\prime}(2)} \\ A=600(1.00417)^{24} \\ A=662.96 \end{gathered}$

Answer:

A = $ 662.96