Janet plans on saving $3,000 a year and expects to earn 8.5%. How much will Janet have at the end of twenty-five years if she earns what she expects?

Question

Quizplus · Accepted Answer

To calculate the future value, we can use the formula:

FV = PV x (1 + r)^n

Where FV is the future value, PV is the present value (in this case, $0), r is the annual interest rate (8.5%), and n is the number of years (25).

Then, we can add the yearly savings of $3,000 to the future value each year:

FV = ($0 x (1 + 0.085)^25) + ($3,000 x ((1 + 0.085)^25 - 1) / 0.085)

FV = $236,003.38

Therefore, the best choice is C ($236,003.38) as it is the only one that matches the calculated future value.

Janet Plans on Saving $3,000 a Year and Expects to Earn