Question

Jerry starts to save at age 35 for a vacation home that he wants to buy for his 50th birthday. He will contribute $300 each month to an account, which earns 1.7% interest, compounded annually. What is the future value of this investment, rounded to the nearest dollar, when Jerry is ready to purchase the vacation home? Answers: $61,960 $60,924 $5,077 $5,163 This is the only question I couldn't figure out , I just need help with it please. Thanks

Answer 1

Here we shall use the future annuity formula
FV of annuity= P{[(1+r)^n-1]/r}
monthly contribution is $300
yearly contribution will be 300*12=$3600
hence P=$3600
r=1.7%=0.017
t=n=50-35=15 years
Therefore:
FV of annuity=3600{[(1+0.017)^15-1]/0.017}
=$60924.45
Hence the answer is $60924