Question

can purchase a service contract for all of her major appliances for $180 a year. If the appliances are expected to last for 10 years and she earns 5 percent on her savings, what would be the future value of the amount Krista will pay for the service contract? Use

Answer 1

$2,264.04

Step-by-step explanation:

To find future value we use the formula:

Future Value = Annual payment × Future value annuity factor

Therefore,

`FV = P * [((1+r)^n - 1) / r]`

Where P = Principal amount = $180

r = rate = 5% == 0.05

n = 10 years

`= 180 *[((1+0.05)^1^0) / 0.05]`

`= $180 * 12.578`

= $2,264.04

Therefore the Future Value is $2,264.04