Question

If you invest $1,500 today in a bank that gives you a 5 percent annual interest rate, which of these items can you buy in two years?

electronics worth $1,650
fitness equipment worth $1,700
a holiday package worth $2,000

Answer 1

First, we must calculate the amount that will be available after two years. This is given by: Amount = initial amount * (1 + interest rate)^time Amount = 1500 * (1 + 0.05)^2 Amount = $1,653.75 Therefore, the only items you can buy using this amount are the electronics worth $1,650