Regan opened a savings account and deposited 1,000.00. The account earns 2% interest, compounded quarterly. If she wants to use the money to buy a new bicycle in 2 years, how much will she be able to spend on the bike?

Solution

Regan opened a savings account and deposited 1, 000.00. The account earns 2% interest, compounded quarterly. If she wants to use the money to buy a new bicycle in 2 years, how much will she be able to spend on the bike?

Solution

Amount : 1040.71

Solution steps

Translate the problem into an equation:

A = 1000 (1 + \frac{0.02}{4})^{4 \cdot 2}

1000 (1 + \frac{0.02}{4})^{4 \cdot 2} = 1040.70704 \dots

Round to the nearest hundredth:

1040.71

Amount : 1040.71

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