Question

Javier is currently paying ​$1,200 in interest on his credit cards annually.​ If, instead of paying​ interest, he saved this amount every​ year, how much would he accumulate in a​ tax-deferred account earning 7% over ​8,13 ​, or 18 ​years?  Click on the table icon to view the FVIFA table LOADING.... ​If, instead of paying​ interest, this amount was saved every year in a​ tax-deferred account earning 7 % over 8 ​years, the amount accumulated would be ​$ ?  ​(Round to the nearest​ dollar.)

Answer 1

Given question comes under the concept of Future value of Annuity

Future value= (PMT/R)*[(1+R)^N -1]

Where R is the interest rate,N is no of years PMT is annual deposit

For 8 Years:

FV=(1200/0.07)*[(1+0.07)^8 -1] = $12312

For 13 Years:

FV= (1200/0.07)*[(1+0.07)^13 -1]= $24169

For 18 Years:

FV=(1200/0.07)*[(1+0.07)^18 -1]= $40799