In 2 years, Melissa wants to buy a bicycle that costs 400.00. If she opens a savings account that earns 3% interest compounded annually, how much will she have to deposit as principal to have enough money in 2 years to buy the bike?

Solution

Solution

Principal : 377.04

Solution steps

Translate the problem into an equation:

400 = P (1 + \frac{0.03}{1})^{1 \cdot 2}

Solve for

P, 400 = P (1 + \frac{0.03}{1})^{1 \cdot 2} : P = 377.04

Principal : 377.04

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