Trent and Ava deposit $700.00 into a savings account which earns 15% interest compounded annually. 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.
Given:
Principal (P) = $700.00
Interest rate (r) = 15% = 0.15 (expressed as a decimal)
Number of times interest is compounded per year (n) = 1
Time (t) = 3 years
Using the formula A = P(1 + r/n)^(nt), we can calculate the final amount (balance):
A = 700(1 + 0.15/1)^(1*3)
A = 700(1 + 0.15)^3
A = 700(1.15)^3
A ≈ 700(1.529)
A ≈ $1070.30
Therefore, Trent and Ava will be able to spend approximately $1070.30 on their trip.