Question

You want to buy a new sports car 3 years from now and you want to save $4,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5% annual compounding interest rate. How much will you have at the end of three years

Answer 1

FV= $12,810

Step-by-step explanation:

Giving the following information:

Annual deposit= $4,200

n= 3

i= 5% annual compounding

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

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

A= annual deposit

FV= {4,200*[(1.05^2) - 1]}/0.05

FV= 8,610 + 4,200

FV= $12,810