Question

Assume a person saves $62 a month by using coupons and doing comparison shopping. a. What is the amount of annual savings? b. What would be the future value of this annual amount over 10 years, assuming an interest rate of 4 percent? Use Exhibit 1-B. (Round FVA factor to 3 decimal places and final answer to 2 decimal places.)

Answer 1

Annual savings= $744

FV= $8,932.54

Step-by-step explanation:

Giving the following information:

Assume a person saves $62 a month by using coupons and doing comparison shopping.

A. Annual savings= 62*12= $744

B.

i= 0.04

n=10

To calculate the future value, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual saving

FV= {744*[(1.04^10) - 1]} / 0.04

FV= $8,932.54