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10 December, 13:36

Jake received $300 for his birthday. He must decide how much of it to save and how much to spend. His bank has a 5% interest rate. How much more would be in his account after 5 years if he saved $300 than if he saved $250?

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  1. 10 December, 13:38
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    Assuming no compounding, given an interest rate of 5%, after 5 years the $300 dollars become:

    300 * (1+5%) ^5 = $382.884469

    By saving $250 instead,

    250 * (1.05) ^5=319.07039

    The difference is 382.8845-319.0704 = 63.8141

    Step-by-step explanation:

    The formula is FV=PV * (1+r%) ^T

    Where:

    FV - future value

    PV - present value

    r% - interest rate

    T - Time (usually in years)
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