Question

Ricardo is a 35-year-old pack-and-a-half-per-day smoker who pays $5.49 for a pack of cigarettes. Observing an uncle suffering from emphysema, he decides to stop smoking. To help motivate and reward himself, he decides to put the cost of cigarettes into an annuity until he is 65. Assuming an annuity with an interest rate of 4.4% compounded monthly and investing the cost of 45 packs each month, find the future value when Ricardo is 65. (Round your answer to the nearest cent.)

Answer 1

Given,

Cost for a pack of cigarettes = $5.49

Ricardo is investing the cost of 45 packs each month.

Therefore Monthly payment = 45 x $5.49 = $247.05

Ricardo decides to put the cost of cigarettes into an annuity from 35 until he is 65.

So, Investment period = 65 – 35 = 30 years or 360 months

Interest rate = 4.4%

compounding is done monthly.

Therefore,

With these values, we have to find out future Value.

$184,236.10 the future value when Ricardo is 65.

Excel cell reference is given below.

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