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elena-14-01-66 [18.8K]
3 years ago
13

The Pirerras are planning to go to Europe 2 years from now and have agreed to set aside $170/month for their trip. If they depos

it this money at the end of each month into a savings account paying interest at the rate of 5%/year compounded monthly, how much money will be in their travel fund at the end of the second year?
Business
1 answer:
4vir4ik [10]3 years ago
8 0

Answer:

They will have $4,281.61 at the end of second year.

Explanation:

This is an annuity problem. Use formula for finding FV of annuity to get the correct answer

FVA=\frac{PMT}{r} [(1+r)^{n} -1]

PMT=170

r = 0.05/12= 0.0041667

n = 2*12= 24 months

FVA= (170/0.0041667)*[(1+\frac{0.05}{12} )^{24} -1]= $4281.606

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