Suppose that you want to avoid paying interest and decide you'll only buy the furniture when you have the money to pay for it. An annuity is basically the opposite of a fixed-installment loan: you deposit a fixed amount each month and receive interest based on the total amount that's been saved. The future value formula is: A = 12M 1+ r 12 r 12t -1 where M is the regular monthly payment, r is the annual interest rate in decimal form, and t is the term of the annuity in years. With a monthly payment of $110, what would the future value be if you chose an annuity with a term of two years at 4.5% interest? Round you answer to the nearest cent. The future value would be $ X
Suppose that you want to avoid paying interest and decide you'll only buy the furniture when you have the money to pay for it. An annuity is basically the opposite of a fixed-installment loan: you deposit a fixed amount each month and receive interest based on the total amount that's been saved. The future value formula is: A = 12M 1+ r 12 r 12t -1 where M is the regular monthly payment, r is the annual interest rate in decimal form, and t is the term of the annuity in years. With a monthly payment of $110, what would the future value be if you chose an annuity with a term of two years at 4.5% interest? Round you answer to the nearest cent. The future value would be $ X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![**Understanding Annuities for Future Savings**
Suppose that you want to avoid paying interest and decide you'll only buy the furniture when you have the money to pay for it. An annuity is basically the opposite of a fixed-installment loan: you deposit a fixed amount each month and receive interest based on the total amount that’s been saved. The future value formula is:
\[
A = \frac{12M \left(1 + \frac{r}{12}\right)^{12t} - 1}{r}
\]
where \( M \) is the regular monthly payment, \( r \) is the annual interest rate in decimal form, and \( t \) is the term of the annuity in years.
**Example Problem:**
With a monthly payment of $110, what would the future value be if you chose an annuity with a term of two years at 4.5% interest? Round your answer to the nearest cent.
**Calculation:**
The future value would be $ ____.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faf54cc92-fe70-42ec-a5a5-6c03b8447a69%2F27b42999-2840-4666-a370-2803191b920c%2Fz857jc3l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Understanding Annuities for Future Savings**
Suppose that you want to avoid paying interest and decide you'll only buy the furniture when you have the money to pay for it. An annuity is basically the opposite of a fixed-installment loan: you deposit a fixed amount each month and receive interest based on the total amount that’s been saved. The future value formula is:
\[
A = \frac{12M \left(1 + \frac{r}{12}\right)^{12t} - 1}{r}
\]
where \( M \) is the regular monthly payment, \( r \) is the annual interest rate in decimal form, and \( t \) is the term of the annuity in years.
**Example Problem:**
With a monthly payment of $110, what would the future value be if you chose an annuity with a term of two years at 4.5% interest? Round your answer to the nearest cent.
**Calculation:**
The future value would be $ ____.
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