II$.$ Planning: The Key to Wealth

Abdol Akhim has just come from a Personal Finance class where he learned that he can

determine how much his savings will be worth in the future. Abdol is completing his

two$-$year business administration degree this semester and has been repairing

computers in his spare time to pay for his tuition and books. Abdol got out his savings

records and decided to apply what he had learned. He has a balance of $$1,000$ in a

money market account at First Savings Bank, and he considers this to be an emergency

fund. His instructor says that he should have $3-6$ months of his total bills in an

emergency fund. His bills are currently $$700$ a month. He also has a checking account

and a regular savings account at First Savings Bank, and he will shift some of his funds

from those accounts into the emergency fund. One of Abdol's future goals is to buy a

house. He wants to start another account to save the $$8,000$ he needs for a down

payment.

$($a$)$ How much interest will Abdol receive on $$1,000$ in a $365-$day year if he keeps it

in the money market account earning $2\mathrm{.}25\%$ compounded daily?

$($b$)$ How much money must Abdol shift from his other accounts to his emergency

fund to have four times his monthly bills in the account by the end of the year?

$($c$)$ Abdol realizes he needs to earn more interest than his current money market can

provide. Using annual compounding on an account that pays $5\mathrm{.}5\%$ interest

annually, find the amount Abdol needs to invest to have the $$8,000$ down

payment for his house in $5$ years.