Question

Shaan and Anita currently insure their cars with separate companies, paying $790 and $645 a year. If they insure both cars with the same company, they would save 10 percent on their annual premiums. What would be the future value of the annual savings over 8 years based on an annual interest rate of 5 percent

Answer 1

The future value of annual savings is $1,370.30

Step-by-step explanation:

The amount of annual savings =(Shaan's premium +Anita's premium)*10%

Shann's premium is $790

Anita's premium is $645

Annual savings =($790+$645)*10%

=$143.5

The future value formula is given below:

=-fv(rate,nper,pmt,-pv)

rate is 5% annual interest rate

nper is the 8 years that is the duration of investment

pmt is the annual savings of $143.5

pv is the total amount invested now which is zero

=-fv(5%,8,143.5,0)

fv=$ 1,370.30