Kirk and Pamela deposit 600.00 into a savings account which earns 2% interest compounded quarterly. They want to use the money in the account to go on a trip in 2 years. How much will they be able to spend?

Solution

K i r k an d P am e l a d e p os i t 600.00 in t o a s a v in g s a cco u n t w hi c h e a r n s 2% in t eres t co m p o u n d e d q u a r t er l y . T h ey w an t t o u se t h e m o n ey in t h e a cco u n t t o g o o n a t r i p in 2 ye a rs . Ho w m u c h w i ll t h ey b e ab l e t o s p e n d ?

Amount : 624.42

Solution steps

Translate the problem into an equation:

A = 600 (1 + \frac{0.02}{4})^{4 \cdot 2}

600 (1 + \frac{0.02}{4})^{4 \cdot 2} = 624.42422 \dots

Round to the nearest hundredth:

624.42

Amount : 624.42