EXPLANATION
Let's see the facts:
Austin and Carly deposit: $500
Interest rate= 1%
Compounding period = monthly
Total number of years = 2
Given the Compounding Interest Rate formula:
[tex]\text{Compound amount = P (1+r/n)\textasciicircum{}nt}[/tex]n is the compounding period
t is the number of years
r is te interest rate in decimal form
Replacing the given values will give us:
[tex]\text{Compound amount = 500 (1+}\frac{0.01}{12})^{12\cdot2}[/tex]Solving the power:
[tex]\text{Compound amount = 500 }\cdot1.020192843[/tex][tex]\text{Compound amount = \$510.09}[/tex]Answer: Austin and Carly will be able to spend $510.09.
