Question

Jerry calculates that if he makes a deposit of $6 each month at an APR of 4.8%, then at the end of two years he'll have $100. Benny
says that the correct amount is $163. The Regular Deposits Rule of Thumb should be helpful here.
Find the correct balance after two years. (Round your answer to the nearest cent.)

Answer 1

Assuming Jerry calculates that if he makes a deposit of $6 each month at an APR of 4.8%, then at the end of two years the correct balance will be: $158.5

First step is to determine Jerry total deposit

over the two years

Total deposit = 24×$5

Total deposit= $144

Now let determine what the correct balance will be at end of two years

Using this formula

Maximum Amount=Principal (1+r)^t

Where:

Principal=$144

r=4.8%/12 = 0.4% or 0.004

t=24 months

Let plug in the formula

Maximum Balance = $144 (1.004)^24

Maximum Balance  = $158.5

Based on the above calculation both Jerry $100 and Benny $163 balance are  ​eliminated or rule out because the correct balance after two years is $158.5

Inconclusion Assuming Jerry calculates that if he makes a deposit of $6 each month at an APR of 4.8%, then at the end of two years the correct balance will be: $158.5

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