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?

Question

Mathematics

Valeria Fernandez

12 February, 20:31

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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Answers (1)

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Sariah Fleming · Answer 1

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)