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7 February, 00:12

Retreaded Tires plans to save $23,500, $24,500, $26,500, and $28,000 at the end of each year for Years 1 to 4, respectively. If it earns 2.1 percent on its savings, how much will the firm have saved at the end of Year 4?

A. $100,878.30

B. $102,140.20

C. $105,608.11

D. $104,174.00

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  1. 7 February, 00:20
    0
    Option C. $105,608.11

    Explanation:

    Basis:

    Interest compounded monthly rate = 0.021/12 = 0.00175

    1. Year 1:

    All the figures in dollars.

    Initial balance: 0 Initial balance + interest = 0 Deposit at the end of the year: 23,500 Final balance: 23,500

    2. Year 2:

    All the figures in dollars.

    Initial balance: 23,500 Initial balance + interest: 23,500 (1 + 0.00175) ¹² = 23,998.28 Deposit at the end of the year: 24,500 Final balance: 24,500 + 23,998.28 = 48,498.28

    3. Year 3:

    All the figures in dollars.

    Initial balance: 48,498.28 Initial balance + interest: 48,498.28 (1 + 0.00175) ¹² = 49,526.60 Deposit at the end of the year: 26,500 Final balance: 26,500 + 49,526.60 = 76,026.60

    4. Year 4:

    All the figures in dollars.

    Initial balance: 76,026.60 Initial balance + interest: 76,026.60 (1 + 0.00175) ¹² = 77,638.62 Deposit at the end of the year: 28,000 Final balance: 28,000 + 77,638.62 = 105,638.62

    Assuming differences in rounding intermediate values, the answer is the option C.
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