Cody and Mandy deposit 800.00 into a savings account which earns 5% interest compounded monthly. 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?Round your answer to the nearest cent.

Solution

C o d y an d M an d y d e p os i t 800.00 in t o a s a v in g s a cco u n t w hi c h e a r n s 5% in t eres t co m p o u n d e d m o n t h 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 ? R o u n d yo u r an s w er t o t h e n e a res t ce n t .

Amount : 883.95

Solution steps

Translate the problem into an equation:

A = 800 (1 + \frac{0.05}{12})^{12 \cdot 2}

800 (1 + \frac{0.05}{12})^{12 \cdot 2} = 883.95306 \dots

Round to the nearest hundredth:

883.95

Amount : 883.95