Question

Student A starts with $100 in the bank and makes $5 a day. Student B starts with $50 and makes $7 a day. Assuming the students save their money, when will they have the same amount of money ?

Answer 1

No. They will not have the same amount of money.

Explanation:

First, convert R as a percent to r as a decimal

r = R/100

r = 3.875/100

r = 0.03875 rate per year,

Then solve the equation for A

A = P(1 + r/n)nt

A = 10,000.00(1 + 0.03875/12)(12)(7.5)

A = 10,000.00(1 + 0.003229167)(90)

A = $13,366.37

Summary:

The total amount accrued, principal plus interest, with compound interest on a principal of $10,000.00 at a rate of 3.875% per year compounded 12 times per year over 7.5 years is $13,366.37. Therefore, they cannnot save the same amount.