Task 1

To help Janette cover her college expense, 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, how much can she
put aside within eight months? Assume Janette puts the amount she put aside within eight
months on the account that earns 4.75% per year, compounded annually. What would be the
balance of this account in five years? Round your answers to the nearest dollar. Show your
work.

a.) Given that Janette follows the above income/spending schedule, how much can she
put aside within eight months?

SOLUTION:

To determine how much Janette can put aside within eight months, we need to subtract her total
expenses from her total income.

Total Income per Month = Allowance + Part-time job income

Total Income per Month = $340 + $600
Total Income per Month = $940

Total Expenses per Month = Rent expense + Car insurance + Clothes + Personal care +
Entertainment + Eating out + Other spending
Total Expenses per Month = $200 + $75 + $80 + $50 + $100 + $140 + $100
Total Expenses per Month = $745

Janette's savings per Month = Total Income per Month - Total Expenses per Month
Janette's savings per Month = $940 - $745
Janette's savings per Month = $195

So, Janette can save $195 per month. Therefore, she can put aside within eight months:

Total savings in 8 months = Janette's savings per Month * 8

Total savings in 8 months = $195 * 8
Total savings in 8 months = $1560

Answer:
Janette can put aside $1560 within eight months.
b.) Assume Janette puts the amount she put aside within eight months on the account
that earns 4.75% per year, compounded annually. What would be the balance of this
account in five years? Round your answers to the nearest dollar.

SOLUTION:

To calculate the balance of Janette's account in five years, we can use the compound interest
formula:
𝑟 𝑛𝑡
𝐴 = 𝑃(1 + 𝑛
)

where:
A = the final amount
P = the initial principal (amount put aside by Janette)
r = the annual interest rate (4.75%)
n = the number of times the interest is compounded annually (1, as it is compounded annually)
t = the number of years (5)

P = $1560 (amount put aside by Janette)

r = 0.0475 (annual interest rate)
n = 1 (compounded annually)
t = 5 (number of years)

Substituting the values in the formula, we get:

A = $1560(1 + 0.0475/1)^(1*5)
A = $1560(1.238017)
A = $1931.25

Therefore, the balance of Janette's account in five years would be $1,931 (rounded to the
nearest dollar).

Answer:
The balance of Janette's account in five years would be $1,931.