Question

Ricky spends $103.19 in additional interest and charges on monthly payments as the result of a prior bankruptcy. If Ricky had been able to save this money for one year and then put it into a savings account earning 3.1% simple interest, how much money could he have in savings after two more years?
a.
$1,238.28
b.
$1,276.67
c.
$1,315.06
d.
$2,476.56

Answer 1

Interpret $103.19 as a monthly amount. In one year he could save 103.19 × 12 = 1,238.28.
With simple interest for 2 more years: A = 1,238.28(1 + 0.031·2) = 1,238.28(1.062) = 1,315.06.

Answer: c. $1,315.06