Question

A driver education course

costs $45 but saves those
under 25 years old 10% of their annual insurance premiums until they are 25. Dan has just
turned 18, and his insurance is $100 per month.

1. When will the amount saved from insurance equal the price of the course?
2. Including the cost of the course, when Dan turns 25, how much will he have saved?

Answer 1

1. after 4.5 months (or 5)
2. $795

Explanation:

10% of $100 per month is $10 per month.

1. By saving $10 per month on insurance cost, Dan's savings after 4.5 months will be equal to the $45 cost of his course. (If billing is monthly, he won't experience any net gain from the course until the 5th insurance payment--after 5 months.)

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2. In 7 years, the savings on insurance costs will total ...

(7 years)×(12 months/year)×($10 /month) = $840

His cost for the course is $45, so his net saving is ...

$840 -45 = $795 . . . net saving by age 25