In 2003, Troy bought a new car for
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The amount in Isabel's account after 3 years can be calculated using the
future value of an annuity formula.
The cars within Isabel's budget are;
- Choice 2
- Choice 3
- Choice 4
Reasons:
The amount she saves every month, PMT = $200
The compound interest on the account, r = 1.7%
The value of the account after t = 3 years is given as follows;
Where;
n = 12 × t
Which gives;
Therefore, the cars within her budget for which she can make a down payment are cars that require a down payment of less than $7,381.4, which are;
Choice 2, that requires a down payment of $6,200
Choice 3, that requires a down payment of $5,100
Choice 4, that require a down payment of $7,250
<em>Question parameters obtained from a similar question posted online are;</em>
<em>The amount Isabel saves each month = $200</em>
<em>The compound interest rate on the account = 1.7% compounded monthly</em>
Learn more about the future value of an annuity here: