The information in the table shows how much a specific monthly contribution can result in after 3 years of investment with a 4.2% annual interest rate, compounded monthly.
On average, the annual cost to attend a 2-year public institution in the 2020-2021 academic year is $3,900. If the goal is to cover the cost for two years at a 2-year public institution after 3 years of investment, what is the minimum amount a student should be saving each month?
(1 point)
Responses
$125
$125
$300
$300
$175
$175
$225
To find the minimum amount a student should be saving each month to cover the cost for two years at a 2-year public institution after 3 years of investment, we need to calculate the future value of the monthly contributions considering the 4.2% annual interest rate compounded monthly.
Looking at the information provided in the table, we can see that a monthly contribution of $300 will result in $11,255.21 after 3 years. Since the goal is to cover the cost for two years at a 2-year public institution, which is $3,900 per year, the total cost for two years would be $3,900 * 2 = $7,800.
Therefore, the minimum amount a student should be saving each month is $300.