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    Task Finance and Economics

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    Angie Naz
    Janette receives $340 monthly from her parents and earns $600 from her part-time job. After paying $200 rent, $75 insurance, and $330 for other expenses, she can save $195 per month. Over 8 months, she can save $1,560. If invested at 4.75% annual interest compounded annually, the balance will be $1,967.41 after 5 years.

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    Task Finance and Economics

    Uploaded by

    Angie Naz
    1K views3 pages
    Janette receives $340 monthly from her parents and earns $600 from her part-time job. After paying $200 rent, $75 insurance, and $330 for other expenses, she can save $195 per month. Over 8 months, she can save $1,560. If invested at 4.75% annual interest compounded annually, the balance will be $1,967.41 after 5 years.

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    Janette receives $340 monthly from her parents and earns $600 from her part-time job. After paying $200 rent, $75 insurance, and $330 for other expenses, she can save $195 per month. Over 8 months, she can save $1,560. If invested at 4.75% annual interest compounded annually, the balance will be $1,967.41 after 5 years.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    1K views3 pages

    Task Finance and Economics

    Uploaded by

    Angie Naz
    Janette receives $340 monthly from her parents and earns $600 from her part-time job. After paying $200 rent, $75 insurance, and $330 for other expenses, she can save $195 per month. Over 8 months, she can save $1,560. If invested at 4.75% annual interest compounded annually, the balance will be $1,967.41 after 5 years.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Naz 1

    Angelina C. Naz

    Finance & Economics 1

    November 09,2021

    Task 1

    To help Janette cover her college expense, parents provide Janette with a monthly

    allowance of $340. Besides, Janette earns $600 per month from the part-time job. Janette has to

    pay $200 in rent expense and $ 75 per month for her car insurance. Janette plans to spend

    monthly $80 on clothes, $50 for personal care, and $100 for entertainment. Janette also estimates

    her monthly eating out expense at $140, and she expects that $100 will be enough to cover all

    her other spending. Given that Janette follows the above income/spending schedule, how much

    can she put aside within eight months? Assume Janette puts the amount she put aside within

    eight months on the account that earns 4.75% per year, compounded annually. What would be

    the balance of this account in five years? Round your answers to the nearest dollar. Show your

    work.

    Janette’s Income and Expenditures

    FOR EIGHT (8)


    TOTAL
      PER MONTH MONTHS
    SOURCE OF INCOME      
    Monthly Allowance $340.00 $2,720.00  
    Part-time earnings $600.00 $4,800.00 $ 7,520.00
    EXPENDITURES      
    Rental fee $200.00 $1,600.00  
    Insurance fee $75.00 $600.00  
    Clothing expense $80.00 $640.00  
    Hygiene /personal care expense $50.00 $400.00  
    Entertainment expense $100.00 $800.00  
    Meal expense $140.00 $1,120.00  
    Other expenses $100.00 $800.00 $ 5,960.00
    Total Excess amount for Deposit     $ 1,560.00
    Naz 2

    Explanation as follows:

    Total Monthly Income:

    $340+$600=$940.00

    Total Monthly Expenditure:

    $75+$200+$80+$50+$100+$140+$100=$745.00

    Monthly Deposit:

    $940-$745=$195.00

    Eight (8) Months Deposit:

    $195 x 8 = $1,560.00

    Answer 1. Janette can put deposit of $1,560.00 for eight (8) months.

    The bank deposit balance is compounded annually with 4.75% interest income.

        Interest earned at  
    No of years Beginning Balance 4.75% Ending balance
    1st year $ 1,560.00 $ 74.10 1,634.10
    2nd year $ 1,634.10 $ 77.62 1,711.72
    3rd year $ 1,711.72 $ 81.31 1,793.03
    4th year $ 1,793.03 $ 85.17 1,878.20
    5th year $ 1,878.20 $ 89.21 $ 1,967.41
    Interest earned for 5years $ 407.41  

    The interest earned for first (1st ) year is computed as Principal x Interest rate

    $1,560.00 x 4.75%= $74.10

    To get interest earned on the following years, ending balance from previous year multiply by

    interest rate, and so on.

    For Second (2nd ) year : ($1,634.10) x 4.75%= $77.62


    Naz 3

    For the Third (3rd) year: ($1,711.72) x 4.75%= $81.31

    For the Fourth (4th) year: $1,793.03 x 4.75% =$85.17

    For the Fifth Year (5th) year $1,878.20 x4.75% = $89.21

    The total compounded interest of Janette’s account for five years is $407.41.

    Answer 2. The total balance of Janette’s account for five years is $ 1,967.41.

    The ending balance of an account with compound interest can also be calculated based on the
    following formula:

    C=P(1+r) ⁿ

    P -Principal

    r- interest rate

    n- no. of period

    C =$1,560.00 (1+0.0475) ^ 5

    = $1,560.00 (1.0475) ^ 5

    =$1,560.00 (1.2611599.14)

    C= $ 1,967.41 for 5 years.

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