Tony opened a savings account and deposited $200.00. The account earns 10% interest, compounded annually. 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?
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.
First, let's calculate the final amount in the savings account after 3 years using the formula A=P(1+r/n)^(nt)
A = 200(1+0.10/1)^(1*3)
A = 200(1+0.10)^3
A = 200(1.1)^3
A = 200(1.331)
A = 266.20
Therefore, Tony will be able to spend $266.20 on the bike.