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8 March, 07:32

Your friend deposits $3000 in the bank for his graduation ceremony three years from now. Assume that the interest rate is 3% and compounded annually. What will be the amount available at the time of his graduation ceremony?

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  1. 8 March, 07:48
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    Answer: $3,278.18

    Explanation:

    This is a matter of Compound interest as you are to find how much your friend would have after 3 years assuming the money was being compounded every year.

    The formula for compound interest is,

    FV = PV (1 + r) ^ n

    FV is the value in future after the compounding

    PV is the Present Value

    r is interest rate

    n is the no. of periods of compounding.

    FV = 3,000 (1 + 0.03) ^ 3

    FV = 3278.181

    FV = $3,278.18

    The amount available at the time of his graduation ceremony will be $3,278.18
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