You're trying to save to buy a new car valued at $42,650.You have $40,000 today that can be invested at your bank.The bank pays 4.2 percent annual interest on its accounts.How long will it be before you have enough to buy the car for cash? Assume the price of the car remains constant.
A)1.17 years
B)2.12 years
C)1.06 years
D)1.61 years
E)1.56 years

Question

Quizplus · Accepted Answer

The correct answer is E.The amount of interest earned in one year is $40,000 * 0.042 = $1,680. The amount of money needed to buy the car is $42,650 - $40,000 = $2,650. So, it will take $2,650 / $1,680 = 1.56 years to save enough money to buy the car.

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