Question

Megan is already looking ahead to graduation and a job, and she wants to buy a new car not long after her graduation. If after graduation she begins an investment program of $2,300 per year in an investment yielding 6 percent, what will be the value of the fund after three years? (Hint: Use Appendix A.3 (Links to an external site.) or the Garman/Forgue companion website.) Round Future value of Series of Equal Amounts in intermediate calculations to four decimal places. NO cents! DOLLARS ONLY

Answer 1

Answer:

$ 7,322  

Explanation:

$2300 per year is an annuity investment. The formula for future annuity value is as below

FV  =  A  × (1 + r)^n - 1 / r

                           

Where A = amount invested periodically

r = interest rate, 6% or 0.06

n = 3 years

Fv = $2300 x{ (1 +0.6)^3 -1} /0.06

Fv  = $2300 x (1.191016-1) /0.06

Fv  = $2300 x  ( 0.191016/0.06)

Fv =  $2300 x  3.1836  

Fv=  $ 7,322.28

Fv= $ 7,322