Question

You want to buy a new sports car 3 years from now, and you plan to save $4,000 per year, beginning one year from today.  You will deposit your savings in an account that pays 6.5% interest.  How much will you have just after you make the 3rd deposit, 3 years from now?

Group of answer choices

$12,986

$12,635

$12,364

$12,486

Answer 1

FV of annuity	=	P * [ (1+r)^n -1 ]/ r
Periodic payment	P=	$                4,000.00
rate of interest per period	r=
Rate of interest per year		6.5000%
Payment frequency		Once in 12 months
Number of payments in a year		1.00
rate of interest per period		0.065*12/12	6.5000%
Number of periods
Number of years		3
Number of payments in a year		1
Total number of periods	n=	3
FV of annuity	=	4000* [ (1+0.065)^3 -1]/0.065
FV of annuity	=	12,796.90

Answer is:

12,986 (closest)