Question

Brenda plans to reduce her spending by $50 a month. What would be the future value of this reduced spending over the next 10 years? (Assume an annual deposit to her savings account and an annual interest rate of 3 percent.) Use Exhibit 1-B. (Round FVA factor to 3 decimal places and final answer to 2 decimal places.)

Answer 1

Answer:

$6987.07

Explanation:

Since the Brenda will be saving $50 every month for the period of 10 years, therefore, the future value of annuity formula will be applicable for the purpose of calculation of future value.

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

Here R= monthly amount to be saved =$50

i=interest rate=3/12=0.25%

n=number of payments=10*12=120

Future value=50[((1+0.25%)^120)-1/0.25%]=$6987.07