John's parents will set up a savings account for their first grandchild. They saved $12,000 to invest and they have identified an account paying 2.5 % compounded monthly. Since John and Sarah just finished a consumer mathematics course, they each decide to calculate how much the account will grow and how much interest earned at the end of 18 years.

John never rounds his intermediate calculations. He carries out each calculation to as many decimal places as the calculator will indicate. His calculator displays eight decimal places, and he only rounds to the nearest dollar and cents amount at the end of his calculations. 

Sarah always rounds each of her intermediate calculations to 4 decimal places.

Answer the following questions separately, showing the formula and all of your work used to reach your answers.   

a. How much money will John calculate to be in the account at the end of 18 years if he uses the calculator which answers out to 8 decimal places?

b. Using John's calculations, how much interest   will be earned at the end of 18 years provided he uses a calculator that answers out to 8 decimal places?

c. How much money will Sarah calculate to be in the account at the end of 18 years provided she rounds at each step to 4 decimal places?

d. Using Sarah's calculations, how much interest will be earned at the end of 18 years provided she rounds at each step to 4 decimal places?

Answer rating: 100% (QA)

a The money John will calculate to be in the account at the end of 18 years using the calculator whi... View the full answer