Question

Ashley has a large and growing collection of animated movies. She wants to replace her old television with a new LCD model, so she has started saving for it. At the end of each year, she deposits $1,620 in her bank account, which pays her 10% interest annually. Ashley wants to keep saving for two years and then buy the newest LCD model that is available. Ashley’s savings are an example of an annuity. How much money will Ashley have to buy a new LCD TV at the end of two years?

Answer 1

Answer:

$3,402

Explanation:

We are to calculate the future value of the annuity

The formula for calculating future value = A x (B / r)

B = [(1 + r)^n] - 1

R = interest rate

N = number of years

(1.10)² - 1 = 0.21

$1,620 x( 0.21 / 0.1) = $3,402