You want to buy a new sports car 3 years from now,and you plan to save $4,200 per year,beginning 1 year from today.You will deposit your savings in an account that pays 5.2% interest.How much will you have just after you make the third deposit,3 years from now?

Question

Quizplus · Accepted Answer

We can use the formula for the future value of an annuity to find the amount we will have just after making the third deposit:

FV = PMT * ((1 + r)^n - 1) / r

where:
PMT = annual deposit = $4,200
r = annual interest rate = 5.2% = 0.052
n = number of years = 3

Substituting these values, we get:

FV = 4,200 * ((1 + 0.052)^3 - 1) / 0.052
FV = $13,266.56

Therefore, the best choice is C.

You Want to Buy a New Sports Car 3 Years