SOLUTION: Lacey opened a savings account and deposited $100.00. The account earns 6% interest, compounded monthly. If she wants to use the money to buy a new bicycle in 2 years, how much wil

Question 1152236: Lacey opened a savings account and deposited $100.00. The account earns 6% interest, compounded monthly. If she wants to use the money to buy a new bicycle in 2 years, how much will she be able to spend on the bike?
Round your answer to the nearest cent.
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
f = p * (1 + r) ^ n
f is the future value.
p is the present value.
r is the interest rate per time period.
n is the number of time periods.

time periods are months.
rate is the percent divided by 100.
p = 100
r = 6% per year / 12 = .5% per month / 100 = .005 per month.
n = 2 years * 12 = 24 months.

formula becomes f = 100 * (1 + .005) ^ 24
solve for f to get:
f = 112.7159776 = 112.72
that's how much she will be able to spend on the bike in 2 years.

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