Question

Dave and Gina deposit $4,000.00 into a savings account which earns 2% 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?
Use the formula A=P1+
r
n
nt, where A is the balance (final amount), P is the principal (starting 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

A = P(1 + r/n)^(nt)
A = 4000(1 + 0.02/12)^(12·2) = 4000(1.0016666667)^{24} ≈ 4000(1.04077612) ≈ 4163.10

They will be able to spend $4,163.10.