Sam got a job at the Brick. He plans to save $500 every month for 3 years to buy a car. The savings account earns 2.25% compounded monthly. If he puts the money in his savings account at the end of each month, what will be the balance in the account at the end of the three-year term?

Question

Quizplus · Accepted Answer

The formula for compound interest is: 
A=P(1+r/n)^nt 
where:
A = the balance at the end of the three-year term
P = the monthly amount Sam saves ($500)
r = the interest rate per year (2.25%)
n = the number of times the interest is compounded in a year (12, since it is compounded monthly)
t = the number of years (3)

Using the formula, we can calculate the balance in the account:
A = 500(1+0.0225/12)^(12*3)-1/0.0225/12
A ≈ $18,603.37

Therefore, the best choice is C.

Sam Got a Job at the Brick