Question

You have 24 months left until you graduate and you plan on buying yourself a new $20,000 car on graduation day. If you invest $300 a month for the next 24 months earning 4% a month - will you have enough money?A) NoB) Yes

Answer 1

Answer: No, the money won't be enough to buy the car

Step-by-step explanation:

you plan on buying yourself a new $20,000 car on graduation day and graduation day is 24 months time. If you invest $300 a month for the next 24 months.

The principal amount, p = 300

He is earning 4% a month, it means that it was compounded once in four months. This also means that it was compounded quarterly. So

n = 4

The rate at which the principal was compounded is 4%. So

r = 4/100 = 0.04

It was compounded for a total of 24 months. This is equivalent to 2 years. So

n = 2

The formula for compound interest is

A = P(1+r/n)^nt

A = total amount that would be compounded at the end of n years.

A = 300(1 + (0.04/4)/4)^4×2

A = 300(1 + 0.01)^8

A = 300(1.01)^8

A = $324.857

The total amount at the end of 24 months is below the cost of the car which is $20000. So he won't have enough money to buy the car