You are saving money to buy a car.If you save $300 per month starting one month from now at an interest rate of 4%,how much will you be able to spend on the car after saving for 4 years?
A)$41,778.96
B)$15,287.27
C)$15,587.88
D)$13,286.65

Question

Quizplus · Accepted Answer

First, we need to find the future value of the savings over the 4 years with compound interest. Using the formula for compound interest:

FV = PV * (1 + r/n)^(n*t)

where:
PV = present value (initial savings)
r = interest rate per period (4% per year = 0.04/12 per month)
n = number of compounding periods per year (12)
t = total number of years (4)
FV = future value (total savings after 4 years)

Plugging in the values, we get:

FV = 300 * ((1 + 0.04/12)^(12*4) - 1)/(0.04/12) = $15,587.88

So, after saving for 4 years, you will have $15,587.88 to spend on the car. Therefore, the best choice is C.

You Are Saving Money to Buy a Car