Answer:
the value that should be saved is $4,001.82
Explanation:
The computation of the amount that should be saved at the year end of 5 years in that case where the rate of interest is 4.5% is shown below:
Value in 5 years is
= (1 + rate) × Annual Payment × [{(1 + rate)number of years - 1} ÷ rate]
= (1 + 0.045) × $700 × [{(1 + 0.045)^5 - 1} ÷ 0.045]
= $731.50 × [0.2462 ÷ 0.045]
= $731.50 *×5.4707
= $4,001.82
Hence, the value that should be saved is $4,001.82
