Question

Sophia opened a savings account and deposited 300.00 the account earns 15% interest compounded annually if she wants to use the money to buy a new bicycle in 2 years how much will she able to spend on the bike

Answer 1

Let's use the following formula:

$\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ \text{where:} \\ A=\text{ Accumulated money} \\ P=\text{ Principal or initial investment} \\ n=\text{ number of times interest is compounded per year} \\ t=\text{time} \\ r=\text{rate} \end{gathered}$

Therefore:

$\begin{gathered} A=300(1+\frac{0.15}{1})^{2\cdot1} \\ A=300(1.15)^2 \\ A=396.75 \end{gathered}$

She will be able to spend $396.15