You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts annually, starting today: $650, $670, $670, and $830. If you can earn 5.70 percent annually, how much will you have at the end of four years?

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Business

Mookie

7 June, 19:30

You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts annually, starting today: $650, $670, $670, and $830. If you can earn 5.70 percent annually, how much will you have at the end of four years?

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Laney Delacruz · Answer 1

We will have $3227 at the end of 4 years.

Explanation:

In this case we are saving money each year starting with $650 in the first year, $670 in the second. $670 in the third and $830 in the last year which means the $650 saved in the first year will earn interest for 4 years, $670 for 3 years, then $670 for 2 years and $830 for 1 year. Now we have to find out the ending amount of each payment and add them up.

Future Value = Present value * (1+Interest rate) ^Number of years.

FV 1st year savings=650 * (1.0570) ^4=811

FV 2nd year savings = 670 * (1.0570) ^3=791

FV 3rd year savings = 670 * (1.0570) ^2=748

FV 4th year savings = 830 * (1.0570) ^1=877

Add them all up to find how much will we have at the end of four years

=$3227