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Michael opened a savings account and deposited 100.00. The account earns 8% interest, compounded quarterly. If he wants to use the money to buy a new bicycle in 3 years, how much will he be able to spend on the bike?

Solution

Solution

Amount : 126.82

Solution steps

Translate the problem into an equation:

A = 100 (1 + \frac{0.08}{4})^{4 \cdot 3}

100 (1 + \frac{0.08}{4})^{4 \cdot 3} = 126.82417 \dots

Round to the nearest hundredth:

126.82

Amount : 126.82

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