Question

In an attempt to have funds for a down payment, Jan Carlson plans to save $3,700 a year for the next five years. With an interest rate of 6 percent, what amount will Jan have available for a down payment after the five years?

Answer 1

Answer:

$20,857.24

Explanation:

This is an ordinary annuity question which can be solved using a financial calculator. The inputs are as follows;

Total duration of investment; N = 5

Interest rate per year; I/Y = 6%

Recurring annual payment;  PMT = 3,700

One time cashflow; PV = 0

then compute the future value of the annuity; CPT FV = 20,857.244

Therefore, Jan will have $20,857.24 as down payment in 5 years.