Question

A service contract for a video projection system costs $195 a year. you expect to use the system for four years. instead of buying the service contract, what would be the future value of these annual amounts after four years if you earn 4 percent on your savings? u

Answer 1

Answer:

$828.26

Explanation:

FVA ( future value of annuity ) = P *$\frac{(1+r)^{n}-1 }{r}$

p ( principal amount ) = $195

r (interest rate) = 4% = 0.04

n ( number of years) = 4  

therefore to calculate the FVA we will into the following values into the given equation

FVA = 195 * $\frac{(1+0.04)^{4}-1 }{0.04} = 195 * \frac{1.1699 - 1}{0.04}$

       = 195 ( 0.1699 / 0.04 ) = $828.26

The future annuity will be $828.26

Answer 2

Answer:

The future value of an annuity (FVA) is $828.06

Explanation:

The future value of an annuity (FVA) is the value of payments at a specific date in the future based on the payments being recurring and assuming a discount rate. The future value of an annuity (FVA) is based on regular cash flow. The higher the discount rate, the greater the annuity's future value.

$FVA= P * \frac{(1+r)^n-1}{r}$

Where:

FVA is The future value of an annuity (FVA)

P is payment per period

n is the number of period

r is the discount rate

Given that:

P = $195

r = 4% = 0.04

n = 4 years

$FVA= P * \frac{(1+r)^n-1}{r}$

substituting values

$FVA= 195 * \frac{(1+0.04)^4-1}{0.04}=195*4.246=828.06\\FVA=824.06$

The future value of an annuity (FVA) is $828.06