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Ghella [55]
3 years ago
11

Maryann is planning a wedding anniversary gift of a trip to Hawaii for her husband at the end of 3 years. She will have enough t

o pay for the trip if she invests $2,500 per year until that anniversary and plans to make her first $2,500 investment on their first anniversary. Assume her investment earns a 4 percent interest rate, how much will she have saved for their trip if the interest is compounded in each of the following ways
Business
1 answer:
Sergio [31]3 years ago
5 0

Answer:

The answer is "She saves \$7804 on the trip".

Explanation:

Please find the complete question in the attached file.

Given:

(P) =\$2500\\\\(n) =3 \ years\\\\(r) = 4\%\\\\ \text{compounding period in year}\ (m) =1\\

The formula for Effective annual rate = ((1+(\frac{r}{m}))^m)-1

                                                                 =((1+(\frac{4\%}{1}))^1)-1\\\\=((1+(\frac{4}{100}))^1)-1\\\\=((1+0.04)^1)-1\\\\=((1.04)^1)-1\\\\ =1.04-1\\\\ =0.04 \\\\ = 4\%\\\\

Its potential value of its rental formula is used to measure the value of the rental at the middle of the 3rd year

 The formula for the future annuity = P\times \frac{(((1+i)^n)-1)}{i}

                                                         =2500\times \frac{(((1+0.04)^3)-1)}{0.04}\\\\=2500\times \frac{(((1.04)^3)-1)}{0.04}\\\\=2500\times \frac{(1.124864-1)}{0.04}\\\\=2500\times \frac{0.124864}{0.04}\\\\=2500\times 3.1216\\\\=7804  

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