Question

Krista Lee can purchase a service contract for all of her major appliances for $180 a year. If the appliances are expected to last for 10 years and she earns 5 percent on her savings, what would be the future value of the amount Krista will pay for the service contract

Answer 1

The future value of the amount Krista will pay for the service contract is: $2,264.

Future value

Using this formula

FV=Annual payment × Future value annuity factor

Where:

Annual payment =$180

Future value annuity factor=(10 years;5%)=12.5779

Let plug in the formula

FV=$180× (10 years;5%)

FV=$270 × 12.5779

FV=$2,264

Inconclusion the future value of the amount Krista will pay for the service contract is: $2,264.

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