Question

Gavin and Mariana deposit $2,089.00 into a savings account which earns 10% interest compounded monthly. They want to use the money in the account to go on a trip in 3 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} = 2089(1 + 0.10/12)^{12·3} = 2089(1.0083333333)^{36} ≈ 2089(1.3481826898) ≈ $2,816.35

They will be able to spend $2,816.35 (rounded to the nearest cent).