Question

14-8711

Josie parents opened a college
savings account that pays yearly
simple interest of 5.5%. They opened
the account with $500 and adds $50
each month to her account. How
much money is in her account at the
end of 4 years?
Record your answer and fill in the
bubbles on your answer document.
Be sure to use the correct place
value.

Answer 1

$4,208.5

Explanation:

The simple interest rate of the college savings account, R = 5.5%

The amount with which the account was opened, P = $500

The amount added each month to her account = $50

The amount in her account after 4 years = Required

The interest on each added $50 is given as follows;

50 × 0.055/12 × (1 + 2 + 3 + ... + 47) = 50 × 0.055/12 × (47/2)(1 + 47) = 258.5

The total amount deposited = 500 + 50 × 47 = $2,850

The total interest = 500×0.55×4 + 50 × 0.055/12 × (47/2)(1 + 47) = 1,358.5

The amount in her account at the end of 4 years, A, is given as follows

A = $2,850 + $1,358.5 = $4,208.5