Question

Use the table to answer the question.

Monthly Contribution
(dollars)
125
175
$125
$300
$225
$175
225
300
Total Amount After 3 Years of Investment
with a 4.2% Annual Interest Rate (dollars)
4,803.64
6,725.09
8,646.54
11,528.72
The information in the table shows how much a specific monthly contribution can result in after
3 years of investment with a 4.2% annual interest rate, compounded monthly.
On average, the annual cost to attend a 2-year public institution in the 2020-2021 academic
year is $3,900. If the goal is to cover the cost for two years at a 2-year public institution after 3
years of investment, what is the minimum amount a student should be saving each month?
(1 point)

Answer 1

To cover the cost of a 2-year public institution after three years with a 4.2% interest rate, the minimum monthly contribution necessary is $300.

Step-by-step explanation:

The student's goal is to cover the annual cost of attending a 2-year public institution for two years after an investment period of three years, with a 4.2% annual interest rate compounded monthly. To find the minimum monthly contribution, we must ascertain the total amount needed after three years. The total cost for two years is $3,900 * 2 = $7,800. By inspecting the provided table, we see that a monthly contribution of $300 will accumulate to $11,528.72, which is more than enough to cover the $7,800 required. Therefore, the minimum monthly contribution must be $300 to meet the student's goal.

Answer 2

The minimum monthly savings required to cover the cost of attending a 2-year public institution after 3 years of investment with a 4.2% interest rate is $225. By investing $225 monthly, the student would accumulate $8,646.54, which is sufficient to cover the $7,800 needed for two years of tuition.

Step-by-step explanation:

To determine the minimum monthly savings needed to cover the cost of a 2-year public institution after 3 years of investment with a 4.2% annual interest rate, we must first calculate the total cost of attendance for 2 years. The average annual cost is $3,900;

therefore, for two years it would be $3,900 x 2 = $7,800.

Looking at the provided table, we need to find the monthly contribution that results in a total amount closest to but no less than $7,800 after 3 years of investment.

The contributions listed are $125, $175, $225, and $300 per month, resulting in final amounts of $4,803.64, $6,725.09, $8,646.54, and $11,528.72 respectively.

The minimum monthly contribution needed is $225 since the total amount after 3 years of investment is $8,646.54, which is the smallest amount in the table that is greater than the required $7,800.