Question

Before College you decide that your graduation reward will be to tour Europe. For the three years you are in college, you will deposit money each week in a savings account that earns 18% compounded monthly.
a. If you deposit $10 each week, how much will you have at the end of three years? If you can save $30, how much will you have?
b. If you need $5000 at the end of the three years, how much did you need to save each week?

Answer 1

we assume here that 18% is annual interest rate that is compounded monthly. With this we calculated first the total amount that I will receive at the end of three years. This is calculated at two different weekly saving rates. In this first case we have calculated it for $10 per week saving and then $40 per week saving. This is what we have done in part (a) of the question.

In part (b), we assumed that we needed $5000 at the end of third year. So our future value is $5000. We first calculated that what is needed to save per month and then divide it by 4 to get the required per week saving.