Frances loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $700 in her local bank, which pays her 9% annual interest. Frances decides that she will continue to do this for the next 5 years. Frances's savings are an example of an annuity. How much will she save by the end of 5 years, rounded to the nearest whole dollar?

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Business

Keegan Kirk

26 February, 07:27

Frances loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $700 in her local bank, which pays her 9% annual interest. Frances decides that she will continue to do this for the next 5 years. Frances's savings are an example of an annuity. How much will she save by the end of 5 years, rounded to the nearest whole dollar?

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Answers (1)

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Emilio Mccoy · Answer 1

Future Value = $4,189.30

Explanation:

Giving the following information:

Investment = $700 annual

Interest rate = 9%

Frances decides that she will continue to do this for the next 5 years.

To calculate the final value, we need to use the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual deposit

FV = {700*[ (1.09^5) - 1]} / 0.09

FV = $4,189.30