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)
$300
• $225
• $175
• $125
To calculate the minimum amount a student should be saving each month, we need to consider the future value of their contributions after 3 years of investment with a 4.2% annual interest rate, compounded monthly.
Looking at the table, we can see that a $100 monthly contribution can result in a future value of $3,892.88 after 3 years. Since the annual cost to attend a 2-year public institution is $3,900, we need to find the closest contribution amount that results in a future value greater than or equal to $3,900.
Based on the table, a $125 monthly contribution can result in a future value of $4,866.10 after 3 years, which is greater than the cost of attending a 2-year public institution.
Therefore, the minimum amount a student should be saving each month is $125.