Question

Abdol Akhim has just come from a Personal Finance class where he learned that he can determine how much his savings will be worth in the future. Abdol is completing his two-year business administration degree this semester and has been repairing computers in his spare time to pay for his tuition and books. Abdol got out his savings records and decided to apply what he had learned. He has a balance of $1,000 in a money market account at First Savings Bank, and he considers this to be an emergency fund. His instructor says that he should have 3-6 months of his total bills in an emergency fund. His bills are currently $700 a month. He also has a checking account and a regular savings account at First Savings Bank, and he will shift some of his funds from those accounts into the emergency fund. One of Abdol’s future goals is to buy a house. He wants to start another account to save the $8,000 he needs for a down payment.

how much money must abdol shift from his other accounts to his emergency fund to have four times his monthly bills of 700 in the account by the end of the year if he has 2,275.432

Answer 1

Abdol must transfer $1,800 from his other accounts into his emergency fund to meet his target of having four times his monthly bills, leaving him with $475.432 towards saving for a house down payment.

Step-by-step explanation:

Abdol aims to have an emergency fund that is four times his monthly bills. Abdol's monthly bills are $700, so he needs to have 4 x $700 = $2,800 in his emergency fund. As Abdol already has $1,000 in his money market account and $2,275.432 available to shift from other accounts, he must calculate how much more he needs to add to his emergency fund to reach the $2,800 target.

To reach his goal by the end of the year, Abdol needs to add: $2,800 (target amount) - $1,000 (current emergency fund balance) = $1,800. However, since Abdol has a total of $2,275.432 available, he will have enough to cover the $1,800 needed, with $2,275.432 - $1,800 = $475.432 remaining. This remaining amount could contribute towards his goal of saving for a house down payment.