Suppose that you deposit $858 in a savings account at FirstFederal Savings of Stanton at...

Suppose that you deposit $858 in a savings account at First Federal Savings of Stanton at the start of each of year for the next 8 years, which is your holding period. You plan to leave these contributions and any interest in the account until the end of your holding period. You forecast an annual interest rate of 3.79%, compounded annually.

What is the forecast value of your account at the end of your holding period?

Round your answer to the nearest dollar.

Expert Solution

Since the payment is made at the start of period hence this is known as annuity due.

Annual coupon C = $858

time t = 8 years

rate r = 3.79%

Future Value F = ?

F = C*(1+r)/r*((1+r)^t-1)

= 858*1.0379/0.0379*(1.0379^8-1)

=23496.52*0.35

=$8,144.29

=$8,144

jeff jeffy answered 2 years ago

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