Question

You saving up to buy a car. You plan on making your first savings deposit one year from today, and then making deposits for the following 3 years. These are the amounts you plan to save at the end of each year: Year Projected Savings Amount 1 $1,500 2 $3,000 3 $2,200 4 $3,000 You expect to earn an annual rate of 9% per year throughout. What amount will you have available at the end, at time 4, when you will buy the car

Answer 1

$10,904.84

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

Year Deposit amount ($) At 9% for 3 years Future value of deposits ($)

1 $1,500 (1.09)^3 = 1.295029 $1,942.54

2 $3,000 (1.09)^2 = 1.1881 $3,564.3

3 $2,200 (1.09)^1 = 1.09 $2,398

4 $3,000 1 $3,000

Total $10,904.84

Future value = cash flow × (1 + interest rate)^number of years

When the amount of $10,904.84 is available, I buy the car.