Question

1. A student gets a summer job and she’ll receive a paycheck on the last day of the month in June, July, and August. If she immediately puts $ 100 each month into a savings account that pays 3% annual interest, but compounded monthly, how much money will accumulate in her account by the end of November when she’s ready to do her Christmas shopping?

Answer 1

Answer: She will have $302.76

Explanation:

A = P(1+i)ⁿ

3% annual interest = 3/12 = 0.25% p.m.

we have to solve this month by month because of the amount she is going to add.

• So, by the end of July, using her June money, she will have

P = 100

n = 1

A = 100 (1+0.0025)¹ = 100.25

• by the end of August, using her June and July money, she will have:

P = 100 + 100.25 = 200.25

n = 1

A = 200.25 (1+0.0025)¹ = 200.50

• by the end of november she will have

P = 200.50+100 = 300.50

n = 3

A = 300.50(1+0.0025)³ = 302.76