Question

Three friends decide that they each want to be able to buy a new car in 5 years. Staci puts $3,000 in a savings account with a simple interest rate of 5.5%. Carmen invests $3,200 in an account with a simple interest rate of 4%. Tim invests $2,500 in an account with a 9% interest rate that is compounded annually. Who will have the most money to spend on a new car at the end of the 5 years? will have the most money to spend.

Answer 1

Tim will have the most money to spend, around 3800 because the interest rate is compounded anually

Answer 2

Tim will have the most money to spend.

Explanation:

Staci puts $3,000 in a saving account with a simple interest rate of 5.5%.

His maturity amount will be calculated by the formula of simple interest =

A = P(1+rt)

A = 3,000(1+(0.055×5))

A = 3,000(1+0.275)

A = 3000 × 1.275 = $3,825

Staci will get $3,825 after 5 years

Carmen invests $3,200 in an account with a simple interest rate of 4%.

A = 3,200(1+(0.04×5))

A = 3,200 ( 1+0.2)

A = 3,200 × 1.2 = $3,840

Carmen will get $3,840 after 5 years.

Tim invests 2,500 in an account with a 9% interest rate that is compounded annually.

Now we will calculate the maturity amount of Tim by using this formula

A =
`P(1+(r)/(n))^(nt)`

A =
`2,500(1+(0.09)/(1))^((1)(5))`

A =
`2500(1+0.09)^(5)`

A =
`2500(1.09)^(5)`

A = 2,500 × 1.54 = $3,846.56

Tim will get $3,846.56 after 5 years

Tim will have the most money to spend.