Question

Every month Jon saves $350.00. If he earns 2.5% interest on this amount, how much will he have saved in a year?
A. $1,050.00
B. $2,795.00
C. $4,200.00
D. $4,305.00

Answer 1

@jim_thompson5910

Answer 2

I'm assuming they're saying, that in every month he earns 2.5%
so he really deposits in the bank $350 PLUS 2.5% of $350

that is 350 + 350(0.025) every month

so in a year, well there are 12 months in a year, so 12 times that much

Answer 3

okay I got D!

Answer 4

yeah, I got the same :)

Answer 5

I think it might be referring to a monthly annuity. The formula for which is attached,

Answer 6

im confused now.. so are you saying you may think jdoes anser is wrong?

Answer 7

I'm just saying maybe. I'm not sure. It's just that the problem seems as if it is referring to an annuity.

Answer 8

@amistre64 would you say D is correct?

Answer 9

it is an annuity

Answer 10

and unless stated otherwise, the interest rate is given as an annual rate and would have to be modified by /12 ... for 12 periods

Answer 11

350(1+.025/12)^12 + 350(1-(1+.025)^(12))/(1-(1.025/12))

Answer 12

... one of my typos abounds im sure

Answer 13

hehe

Answer 14

im so confused here lol

Answer 15

350(1+.025/12)^12 + 350(1-(1+.025/12)^(12))/(1-(1+.025/12))

thats better :)

Answer 16

I get 4607, and since the rate is so low to start with ... im assuming D is correct regardless

Answer 17

4607.31173314

Answer 18

Now that I notice, the multiple choice answers are even amounts and an annuity is not something that would calculate to an even amount.

Answer 19

multiple choice options tend to round :)

Answer 20

Okay, as I said it sure sounds like an annuity to me.

Answer 21

Mo = 350
M1 = 350(1+.025/12) + 350
M2 = 350(1+.025/12)^2 + 350(1+.025/12) + 350
M3 = 350(1+.025/12)^3 +350(1+.025/12)^2 + 350(1+.025/12) + 350

letting k clean this up we get a geometric sum

Mn = 350 + 350k + 350k^2 + ... + 350k^n

Answer 22

1+k+...+k^n
-k-...-k^n - k^(n+1)
--------------------
[1-k^(n+1)]/(1-k)

Answer 23

I get 4,257.31 from a calculator located here:
http://www.coolmath.com/calculators/calculator-annuity-1.html

Answer 24

350(1-k^(13))/(1-k), k=1+.025/12

http://www.wolframalpha.com/input/?i=350%281-k%5E%2813%29%29%2F%281-k%29%2C+k%3D1%2B.025%2F12

4607 still :)

Answer 25

even at best ... 350 for 12 months is 4200, so with interest it has to be greater than that

Answer 26

Well Kaitlin, I'm sorry about bringing up the concept of an annuity but it's something to consider if your teacher mentions it.

Answer 27

dont be confused. you will receive different answers for compounding using daily, weekly, monthly, semiannual, and annually. it all depends on how it is compounded. you may want to check with your teacher. the general rule when none is given is to compound annually.