Question

In: Finance

You are contributing money to an investment account so that you can purchase a car in...

You are contributing money to an investment account so that you can purchase a car in five years. You plan to contribute six payments with $2,000 each year. The first payment will be made today (t = 0), and the final payment will be made five years from now (t = 5). If you earn 8% in your investment account, how much will you have in the account six years from now (t= 6)? Note: This is an annuity due problem.

$15,721.3

$15,845.6

$16,843.2

$17,786.3

Solutions

Expert Solution

Future value of annuity due=(1+rate)*Annuity[(1+rate)^time period-1]/rate

=1.08*2000*[(1.08)^6-1]/0.08

=2000*7.92280336

which is equal to

=$15845.6(Approx)

jeff jeffy answered 2 years ago
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