Use the following formula. nt P 1+ 47* A = C Suppose that you drive 50,000 miles per year and gas averages $4 per gallon. Complete parts a. and b. below. 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? $ (Round to the nearest dollar as needed.) ………. b. If you deposit your monthly fuel savings at the end of each month into an annuity that pays 4.8% compounded monthly, how much will have saved at the end of seven years? $ (Round to the nearest dollar as needed.)
Use the following formula. nt P 1+ 47* A = C Suppose that you drive 50,000 miles per year and gas averages $4 per gallon. Complete parts a. and b. below. 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? $ (Round to the nearest dollar as needed.) ………. b. If you deposit your monthly fuel savings at the end of each month into an annuity that pays 4.8% compounded monthly, how much will have saved at the end of seven years? $ (Round to the nearest dollar as needed.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
100%
1.11: Answer A and B questions
![Sure! Here's the transcription and explanation of the content from the image:
---
### Use the following formula:
\[
A = P \left( \frac{\left(1 + \frac{r}{n}\right)^{nt} - 1}{\frac{r}{n}} \right)
\]
**Suppose that you drive 50,000 miles per year and gas averages $4 per gallon. Complete parts a. and b. below.**
---
**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?
$[ \_\_\_\_ ]
(Round to the nearest dollar as needed.)
---
**b.** If you deposit your monthly fuel savings at the end of each month into an annuity that pays 4.8% compounded monthly, how much will you have saved at the end of seven years?
$[ \_\_\_\_ ]
(Round to the nearest dollar as needed.)
---
### Explanation:
The formula provided is the future value of an ordinary annuity, where:
- \( A \) is the future value of the annuity.
- \( P \) is the periodic payment (monthly savings in this context).
- \( r \) is the annual interest rate (4.8% in this case).
- \( n \) is the number of compounding periods per year (12 for monthly).
- \( t \) is the number of years the money is invested (7 years here).
In part a, you calculate the difference in annual fuel costs between a hybrid car and an SUV. In part b, you invest the savings monthly into an annuity to find the future value after seven years.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffebfc829-3adc-4601-a5b5-bd5b3e3c23b0%2F4b6dc37c-9119-4b27-8755-fa26c370291a%2F4j90r2f_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Sure! Here's the transcription and explanation of the content from the image:
---
### Use the following formula:
\[
A = P \left( \frac{\left(1 + \frac{r}{n}\right)^{nt} - 1}{\frac{r}{n}} \right)
\]
**Suppose that you drive 50,000 miles per year and gas averages $4 per gallon. Complete parts a. and b. below.**
---
**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?
$[ \_\_\_\_ ]
(Round to the nearest dollar as needed.)
---
**b.** If you deposit your monthly fuel savings at the end of each month into an annuity that pays 4.8% compounded monthly, how much will you have saved at the end of seven years?
$[ \_\_\_\_ ]
(Round to the nearest dollar as needed.)
---
### Explanation:
The formula provided is the future value of an ordinary annuity, where:
- \( A \) is the future value of the annuity.
- \( P \) is the periodic payment (monthly savings in this context).
- \( r \) is the annual interest rate (4.8% in this case).
- \( n \) is the number of compounding periods per year (12 for monthly).
- \( t \) is the number of years the money is invested (7 years here).
In part a, you calculate the difference in annual fuel costs between a hybrid car and an SUV. In part b, you invest the savings monthly into an annuity to find the future value after seven years.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education