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22 December, 12:22

You want to purchase a motorcycle 4 years from now, and you plan to save $3,500 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7% interest. Under these assumptions, how much will you have 4 years from today? a. $16,918b. $19,584c. $16,112d. $17,763e. $18,652

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  1. 22 December, 13:12
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    c.$16,112

    Explanation:

    Since the payment of $3,500 per year is to be paid for 4 years, starting immediately, therefore the future value of annuity will be determined to calculate the amount that you will have after 4 years.

    Future value of annuity = (1+i) * R[ ((1+i) ^n-1) / i]

    R=Payment to made per year=$3,500

    i=interest rate=5.7%

    n=number of payments to be made in future=4

    Future value of annuity = (1+5.7%) * 3,500[ ((1+5.7%) ^4-1) / 5.7%]

    =$16,112

    So the answer is c.$16,112
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