The information in the table shows how much a specific monthly contribution can result in after three years of investment with a 4.2% annual interest rate, compounded monthly. On average, the annual cost to attend a two-year public institution in the 2020.- 2021 academic year is $3900. If the goal is to cover the cost for two years at a two year public institution after three years of investment, what is the minimum amount the student should be saving each month
Based on the information provided in the table, we can see that a monthly contribution of $100 results in a total of $3,808.47 after three years of investment.
To calculate the minimum amount the student should be saving each month to cover the cost for two years at a two-year public institution, we first need to determine the total cost for two years.
The annual cost is $3900, so the total cost for two years would be $3900 multiplied by 2, which equals $7800.
Since the investment is for three years and will generate the desired amount of $7800, we can divide $7800 by the total return for a $100 monthly contribution, which is $3808.47.
$7800 / $3808.47 = 2.0466 (rounded to 2 decimal places)
Therefore, the student should be saving at least $100 * 2.0466, which is approximately $204.67 per month in order to cover the cost for two years at a two-year public institution after three years of investment.