Question

Brian is an 8th grade student and wants to attend UCLA when he graduates high

school. He plans on getting a part time job in high school so he can start saving for
college. Which of the following options would allow Brian to save the most money?
A
Start saving money as a Senior in high school by adding $150 a month to his
savings account.
B
Start saving money as a Freshman in high school by adding $100 a month to an
account that compounds annually at 5%.
Start saving money as a Sophomore in high school by adding $100 a month to an
account that eams 3% simple interest.
Start saving money as a Junior in high school in a shoe box under his bed
whenever he remembers to add money to it.

Answer 1

A

Explanation:

Answer 2

Answer: Option B would allow Brian to save the most money.

If he starts saving as a freshman and adds $100 a month to an account that compounds annually at 5%, he would have four years of savings before starting college. Using the formula for compound interest:

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

where A is the amount of money accumulated, P is the principal (the initial amount of money), r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time (in years).

If Brian starts with $0 and adds $100 a month for four years (48 months), he would have a total of $4,800. If this money is compounded annually at 5%, the formula becomes:

A = 4800(1 + 0.05/1)^(1*4) = $5,907.15

Therefore, by saving $100 a month in an account that compounds annually at 5%, Brian would accumulate $5,907.15 by the time he starts college, which is more than the other options provided.

Explanation: