Question

You saving up to buy a car. You plan on making your first savings deposit one year from today, and then making deposits for the following 3 years. These are the amounts you plan to save at the end of each year: Year Projected Savings Amount 1 $1,500 2 $3,000 3 $2,200 4 $3,000 You expect to earn an annual rate of 9% per year throughout. What amount will you have available at the end, at time 4, when you will buy the car

Answer 1

Answer:

$10,904.84

Explanation:

According to the scenario, computation of the given data are as follow:-

Year  Deposit amount ($)  At 9% for 3 years Future value of deposits ($)

1            $1,500                            (1.09)^3 = 1.295029        $1,942.54

2             $3,000                    (1.09)^2 = 1.1881                 $3,564.3

3            $2,200                            (1.09)^1 = 1.09                 $2,398

4             $3,000                               1                                 $3,000

Total                                                                                   $10,904.84

Future value = cash flow × (1 + interest rate)^number of years

When the amount of $10,904.84 is available, I buy the car.