Question

Lucas spends $83.42 in additional interest and charges on monthly payments as the result of a prior bankruptcy. If Lucas been able to save this money for the year and then put it into a savings account earning 1.8% simple interest, how much money could he have in savings after 3 more years?
a.
$1,649.72
b.
$1,055.10
c.
$1,019.06
d.
$1,001.04

Answer 1

He saves $83.42 per month for a year: P = 12(83.42) = $1,001.04.
With simple interest for 3 years at 1.8%: A = P(1 + rt) = 1001.04(1 + 0.018·3) = 1001.04(1.054) = $1,055.10.

Answer: b.