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

Answer 1

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.