To save for a new car, Samuel Smith will invest $3,000 at the end of each year for the next 5 years. The interest rate is 8%. What is the future value?

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Business

Hudson Hanna

22 April, 20:21

To save for a new car, Samuel Smith will invest $3,000 at the end of each year for the next 5 years. The interest rate is 8%. What is the future value?

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Answers (1)

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Adriana Villegas · Answer 1

Answer: FV = A ((1 + r) n - 1) / r

FV = $3,000 ((1 + 0.08) 5 - 1) / 0.08

FV = $3,000 ((1.08) 5 - 1) / 0.08

FV = $3,000 (1.4693280768 - 1) / 0.08

FV = $3,000 (0.4693280768) / 0.08

FV = $3,000 x 5.86660096

FV = $17,599.80

Explanation: The question relates to future value of an ordinary annuity. The variables are defined below:

FV = Future value = ?

A = Annuity per period = $3,000

n = No of years = 5 years

r = Interest rate = 8% = 0.08