Question

Steve Wilson wants to deposit $150 per month into an account earning 4 percent for the next 3 years, so he can purchase a used car at that time. What type of computation would he use to determine the amount he will have for his purchase?

A) Simple interest
B) Future value of a single amount
C) Present value of an annuity
D) Present value of a single amount
E) Future value of an annuity

Answer 1

E

Step-by-step explanation:

Future value of an annuity is a method used to calculate the value of a recurring payments in the future.It involves the principal payment , a specific timeline and also interest or discount rate.

Assuming the rate of discount or interest do not change , it can help to accurately predict the value of a future payment or saving.

The interest or discount rate is factored into the present value of the annuity in order to derive the future value.