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27 December, 09:21

Megan has a large and growing collection of animated movies. She wants to replace her old television with a new LCD model, so she has started saving for it. At the end of each year, she deposits $800 in her bank account, which pays her 4% interest annually. Megan wants to keep saving for 6 years and then buy the newest LCD model that is available. Megan's savings are an example of an annuity. How much money will Megan have to buy a new LCD TV at the end of 6 years, rounded to the nearest whole dollar? $7,163 $4,510 $5,306 $5,518

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  1. 27 December, 12:37
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    The correct answer is C: $5,306

    Explanation:

    Giving the following information:

    At the end of each year, she deposits $800 in her bank account, which pays her 4% interest annually.

    Megan wants to keep saving for 6 years and then buy the newest LCD model that is available.

    We need to use the following formula of a final value:

    FV = {A*[ (1+i) ^n-1]}/i

    FV = 800*[ (1.04^6) - 1]/0.04 = $5,306
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