Question

You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts annually, starting today: $640, $690, $690, and $750. If you can earn 7.60 percent annually, how much will you have at the end of four years

Answer 1

$2,980.4

Step-by-step explanation:

To find the answer, we use the future value of an investment formula:

FV = PV(1 + i)^n

Where:

• FV = Future value (the result we are looking for
• PV = Present value (the initial values that the question has given us)
• i = interest rat
• n = number of compounding periods

For the first $640:

FV = $640(1 + 0.0760)^1

FV = $688.6

For the $690

FV = $688.6 + $690 (1 + 0.0760)^1

FV = $1,431

For the second $690

FV = $1,431 + $690 (1 + 0.0760)^1

FV = $2,173.4

For the final $750

FV = $2,173.4 + $750 (1 + 0.0760)^1

FV = $2,980.4

So at the end of four years, you will have $2,980.4.