Future value of an annuity: Zhijie Jiang is saving to buy a new car in four years. She will save $5,500 at the end of each of the next four years. If she invests her savings at 6.75 per cent, how much will she have after four years? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

The future value of an annuity formula is used: FV = Pmt * [((1 + r)^n - 1) / r]. Here, Pmt = $5,500, r = 6.75% or 0.0675, and n = 4. Plugging in these values gives FV = $5,500 * [((1 + 0.0675)^4 - 1) / 0.0675] = $24,329.

Future Value of an Annuity: Zhijie Jiang Is Saving to Buy