Question

emmet opened a savings account and deposited 100.00 the account earns 7% interest compounded monthly if he wants to use the money to buy a new bicycle in 2 years how much will he be able to spend on the bike

Answer 1

Deposited amount is 100.00

rate of interest is 7%

Time period 2 years

The expression for the compond intrest is

$\text{Amount}=\text{Principal}(1+\frac{\text{rate of interest}}{n})^{time\times n}$

Since the interest is compunded monthly so, n=12

Substitute the values

$P=100,\text{ r=0.07, t=2, n=12}$$\text{Amount}=100(1+\frac{0.07}{12})^{2\times12}$

Simplify the expression

$\begin{gathered} \text{Amount}=100(1+0.0058)^{24} \\ \text{Amount}=100(1.0058)^{24} \\ \text{Amount}=\text{ }100\times1.148 \\ \text{Amount}=114.8 \end{gathered}$

After 2 years emment have total amount of 114.8 in the bank so, he can spend 114.8 money to the bike.