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Task1 Solution

Janette receives a monthly income of $940 and has monthly expenses totaling $745, resulting in monthly savings of $195. Over eight months, she can save $1,560. If this amount is invested at an annual interest rate of 4.75%, it will grow to approximately $1,967 after five years.

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5 views2 pages

Task1 Solution

Janette receives a monthly income of $940 and has monthly expenses totaling $745, resulting in monthly savings of $195. Over eight months, she can save $1,560. If this amount is invested at an annual interest rate of 4.75%, it will grow to approximately $1,967 after five years.

Uploaded by

kumarpartik11
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Task 1 Solution

To help Janette cover her college expenses, 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, we calculate her savings
within eight months, and the balance of this account in five years if invested at 4.75% per
year, compounded annually.

Step 1: Monthly Income


 Monthly allowance = $340
 Part-time job income = $600
 Total Monthly Income = $340 + $600 = $940

Step 2: Monthly Expenses


 Rent = $200
 Car Insurance = $75
 Clothes = $80
 Personal Care = $50
 Entertainment = $100
 Eating Out = $140
 Other Spending = $100
 Total Expenses = 200 + 75 + 80 + 50 + 100 + 140 + 100 = $745

Step 3: Savings Per Month


Monthly Savings = Total Income - Total Expenses
Monthly Savings = $940 - $745 = $195

Step 4: Savings in 8 Months


Total Savings in 8 months = 8 × $195 = $1,560

Step 5: Balance after 5 Years


The savings are deposited into an account that earns 4.75% annually, compounded
annually.
Future Value (FV) = P × (1 + r)^t
Where:
P = $1,560 (Principal)
r = 0.0475 (Annual interest rate)
t = 5 years
FV = 1560 × (1 + 0.0475)^5
FV = 1560 × (1.0475)^5
FV ≈ 1560 × 1.261
FV ≈ $1,967 (rounded to the nearest dollar)

Final Answer:
• Janette can put aside $1,560 within eight months.
• The balance of this account after five years will be approximately $1,967.

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