Answer:
James and Terry will have US$ 159,744.59 in their account after 20 years. The correct answer is B. US$ 159,744.59.
Explanation:
1. Let's review the information given to us for solving the question:
Monthly saving = US$ 500
Annual Interest rate = 2.75%
Monthly interest rate = 0.0275/12 = 0.002292 = 0.23%
Duration of the investment = 20 years = 240 months
2. For calculating how much James and Terry will have in their account after 20 years we use the Future value formula, this way:
FV = Monthly saving * [(1 + Monthly Interest rate) ^number of periods - 1/ Monthly interest rate]
Replacing with the real values, we have:
FV = 500 * [(1 + 0.002292) ^240 - 1/ 0.002292]
FV = 500 * [(1.732162 - 1/ 0.002292]
FV = 500 * [0.732162/ 0.002292]
FV = 500 * 319.489185
FV = 159,744.59
James and Terry will have US$ 159,744.59 in their account after 20 years. The correct answer is B. US$ 159,744.59