Question

Matt plans to start his own business once he graduates from college. He plans to save $1,400 every six months for the next five years. If his savings earn 10% annually (or 5% every six months), determine how much he will save by the end of the fifth year.

Answer 1

Answer:

$18,453.40

Explanation:

the easiest way to determine how much money Matt is going to save is by using the future value annuity factor. Using a future value annuity table, we must look for the value that correspond to 5% interest and 10 periods =  13.181

Now we multiply our annuity factor times the amount of money that Matt saves every 6 months = $1,400 x 13.181 = $18,453.40

When Matt graduates from college he should have saved $18,453.40.