Final answer:
Jim will have approximately $12,618.52 in savings after two years and will have earned approximately $618.52 in interest on his savings.
Step-by-step explanation:
Jim is saving $500 per month to buy a pickup truck. The savings account he uses earns 5% interest compounded monthly.
First, let's find out how much money Jim will have in savings after two years. There are 12 months in a year, so in two years, Jim will have saved $500 x 12 x 2 = $12,000.
Next, let's calculate the interest Jim will earn on his savings. To do this, we can use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated, P is the principal amount (initial investment), r is the annual interest rate (as a decimal), n is the number of times interest is compounded per year, and t is the number of years.
In this case, P = $12,000, r = 5% (or 0.05 as a decimal), n = 12 (since interest is compounded monthly), and t = 2. Plugging in these values, we have A = $12,000(1 + 0.05/12)⁽¹²ˣ²⁾ = $12,000(1.004167)²⁴ ≈ $12,618.52.
Therefore, in two years, Jim will have approximately $12,618.52 in savings, and he will have earned approximately $618.52 in interest.