Marcy wants to buy a new car in one year. She currently has $1,500 in the bank. Marcy plans to save $250 a month towards the car. How much will Marcy have for a down payment assuming her bank pays 6% compounded monthly?
|
a. |
$4,584 |
|
|
b. |
$3,084 |
|
|
c. |
$4,217 |
|
|
d. |
$4,676 |
Please add calculations.
Ans D) $ 4676
| FUTURE VALUE OF $ 250 MONTHLY SAVINGS | |
| P = | Periodic payments |
| r = | rate of interest |
| n = | no of years |
| Future Value of Annuity = | P ( (1 + r)n - 1 ) / r |
| 250* ((1 + 6%/12)^12 - 1) / (6%/12) | |
| 3083.890593 | |
| FUTURE VALUE OF $ 1500 | |
| FV = | Future Value |
| PV = | Present Value |
| r = | rate of interest |
| n= | no of period |
| FV = | PV (1 + r )n |
| FV = | 1500*(1+6%/12)^12 |
| FV = | 1592.516718 |
| TOTAL FUTURE VALUE OF INVESTMENT = | $ 3083.90 + $ 1592.52 |
| $ 4676 | |
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