Question

Suppose that you drive 50,000 miles per year and gas averages ​$4 per gallon

A- What will you save in annual fuel expenses by owning a hybrid car averaging 50 miles per gallon rather than an SUV averaging 25 miles per​ gallon?

B- If you deposit your monthly fuel savings at the end of each month into an annuity that pays 5.2​% compounded​ monthly, how much will have saved at the end of seven ​years?

Answer 1

A
Amount of money spent on hybrid that runs for 50 miles/gallon
Amount of gallons consumed per year will be:
50000/50
=10000 gallons
 amount spent per year=1000*4=$4000

Amount of money spent on SUV that runs for 25 miles/gallon

amount of gallons consumed per year will be:
50000/25=2000 gallons

amount spent=2000*4=$8000

Amount saved when using a hybrid will be:
8000-4000
=$4000

B] If the savings are put in continuously compounding account for 7 years, the total amount after 7 years will be:
FV=p(1+r/100)^t

FV=4000(1+5.2/100)^7
=$ 5,703.88