want to buy a new ski boat 2 years from now, and you plan to save $8,200 per year, beginning one year from today.You will deposit your savings in an account that pays 6.2% interest.How much will you have just after you make the 2nd deposit, 2 years from now?

Question

Quizplus · Accepted Answer

This is a future value of an annuity problem (FVIFA). We need to find out the future value of 2 deposits of $8,200 each, made 1 year apart, at an interest rate of 6.2%, compounded annually.

To solve this problem, we can use the following formula:

FV = Pmt x [(1 + r)^n - 1] / r

where:
Pmt = Payment per year = $8,200
r = Interest rate per year = 6.2%
n = Number of years = 2

Using the formula, we get:

FV = $8,200 x [(1 + 0.062)^2 - 1] / 0.062
FV = $8,200 x (1.1296 - 1) / 0.062
FV = $8,200 x 0.1296 / 0.062
FV = $17,058.06

Therefore, the amount you will have just after you make the 2nd deposit, 2 years from now, is $17,058.06, which is closest to option C ($16,908).

Want to Buy a New Ski Boat 2 Years from Now