Taylor has saved $400 at the end of every month for the last 4 years with the intention of paying cash for a new car. She has earned a fixed annual rate of 4% over the 4 year period; interest is compounded monthly. How much can she pay for her new car at the end of the fourth year?
A) $20,784
B) $55,705
C) $17,716
D) $22,272

Question

Quizplus · Accepted Answer

Taylor has saved $400 at the end of every month for the last 4 years, so she has saved a total of $400 x 12 x 4 = $19,200. She has earned a fixed annual rate of 4% over the 4 year period, so she has earned a total of $19,200 x 0.04 x 4 = $3,072 in interest. Therefore, she has a total of $19,200 + $3,072 = $22,272 to pay for her new car.

Taylor Has Saved $400 at the End of Every Month