Reference no: EM132503973
Sara calculates that if she makes a deposit of $7 each month at an APR of 3.6%, then at the end of two years she'll have $174. Lee says that the correct amount is $188. The Regular Deposits Rule of Thumb should be helpful here.
What was the total amount deposited (ignoring interest earned)?
What would the balance be if the total amount were deposited at the beginning of the two years? (Assume no additional deposits are made and the money compounds monthly at an APR of 3.6%)
Whose answer(s) is ruled out by these calculations? Why?
Sara's answer is ruled out by this calculation because her calculation is more than what the balance would be if the total amount was deposited at the beginning of the two years. Lee's answer is also ruled out because his calculation is more than what the balance would be if the total amount was deposited at the beginning of the two years.
Sara's answer is ruled out by this calculation because her calculation is less than the total amount deposited. Lee's answer is also ruled out because his calculation is less than the total amount deposited.
Sara's answer is not ruled out by this calculation because her calculation is more than the total amount deposited but less than what the balance would be if the total amount was deposited at the beginning of the two years. Lee's answer is ruled out because his calculation is more than what the balance would be if the total amount was deposited at the beginning of the two years.
Sara's answer is ruled out by this calculation because her calculation is less than the total amount deposited. Lee's answer is also ruled out because his calculation is more than what the balance would be if the total amount was deposited at the beginning of the two years.
Sara's answer is ruled out by this calculation because her calculation is less than the total amount deposited. Lee's answer is not ruled out because his calculation is more than the total amount deposited but less than what the balance would be if the total amount was deposited at the beginning of the two years.
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