Question

Giselle used the table to predict the cost of one year of college.

Category
Estimated Cost 2017–2018
tuition
$12,450
room and board
$10,125
transportation
$2,600
books and fees
$2,250
other
$1,250

Giselle predicts that she will receive a grant for $4,000. If she has 4 years in which to save, what is the minimum monthly amount she should deposit in an interest bearing savings account to be able to pay her contribution for one year of college?
$400
$500
$600
$700

Answer 1

Answer: $600

Step-by-step explanation:

Total Estimated Cost is given by

$12,450 + $10,125 + $2,600 + $2,250 + $1,250

= $28,675

Allowable time to save = 4 years

= 4 * 12 months

= 48 months

Hence,

The amount to save per month is given by

$28,675 ÷ 48

= $597.40

Therefore,

She should save a minimum of $600 monthly. With this, she will be able to pay for her college in one year.

Note : the $4,000 grant was excluded from the calculation because it's a prediction.

Answer 2

Giselle should put at least $600 in an interest bearing savings account. She has 4 years to save money for college and although she predicts she may receive a $4,000 grant, that does not mean she will. Her expenses are well over $4,000 and if she saves $600 a month for 48 months she will have $28,800 saved without the added interest she will be earning monthly.