The Lopez family is saving $275 monthly for Verona's college education. The family anticipates they will need to contribute $10,000 toward her first year of college, which is in 3 years. Which best explains whether or not the family can expect to have enough money after saving for 3 years?

A. The family will not have enough money. They will have saved only $8,250.

B. The family will not have enough money. They will have saved only $9,900.

C. The family will likely have enough money. They will have saved $8,250 and have accumulated interest.

D. The family will likely have enough money. They will have saved $9,900 and have accumulated interest.

Question

Sonia Mendez

Business

22 December, 13:55

The Lopez family is saving $275 monthly for Verona's college education. The family anticipates they will need to contribute $10,000 toward her first year of college, which is in 3 years. Which best explains whether or not the family can expect to have enough money after saving for 3 years?

A. The family will not have enough money. They will have saved only $8,250.

B. The family will not have enough money. They will have saved only $9,900.

C. The family will likely have enough money. They will have saved $8,250 and have accumulated interest.

D. The family will likely have enough money. They will have saved $9,900 and have accumulated interest.

+5

Answers (1)

Know the Answer?

Andrew Dean · Answer 1

If we multiply the monthly savings of the Lopez family we will have:

$275 * 12 * 3 = $9,900 for next 3 years. It means that correct answer would be B) not enough money or D) enough money. So lets assume that the bank have the annual interest rate of 6% (r = 0.06 : 12 = 0.005 - monthly). Then we can use this formula: S = P * (r + 1) * ((r + 1) ^n - 1) / r

S = 275 * 1.005 * 0.19668 / 0.005 = 275 * 39.35 = $10,871

It means that they will have more than needed for Verona's college.

Answer: D) The family will likely have enough money. They will have saved $9,900 and have accumulated interest.