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+ The future value would be S Y 12 r 12t 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. If you chose an annuity with a term of two years at 4.7% and a monthly payment of $100, the future value would be $2511.27. Recalculate the future value amount if you're willing to raise your monthly payment $20 per month. Round your answer to the nearest cent. X -1 S
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+ The future value would be S Y 12 r 12t 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. If you chose an annuity with a term of two years at 4.7% and a monthly payment of $100, the future value would be $2511.27. Recalculate the future value amount if you're willing to raise your monthly payment $20 per month. Round your answer to the nearest cent. X -1 S
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**Understanding Annuity Payments and Future Value Calculation**
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:
\[ A = \frac{12M \left( \left(1 + \frac{r}{12}\right)^{12t} - 1 \right)}{r} \]
where:
- \( M \) is the regular monthly payment,
- \( r \) is the annual interest rate in decimal form,
- \( t \) is the term of the annuity in years.
For example, if you chose an annuity with a term of two years at 4.7% and a monthly payment of $100, the future value would be \$2511.27.
**Exercise:**
Recalculate the future value amount if you're willing to raise your monthly payment to $120 per month. Round your answer to the nearest cent.
**Future Value Calculation Submission:**
The future value would be $ ______________.
By using the given formula, you'll be able to determine the exact amount you would have in the future based on your adjusted monthly payments.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faf54cc92-fe70-42ec-a5a5-6c03b8447a69%2Fdb8e88b0-7a7e-4c62-9a67-5301a0179745%2F8h8h6om_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Understanding Annuity Payments and Future Value Calculation**
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:
\[ A = \frac{12M \left( \left(1 + \frac{r}{12}\right)^{12t} - 1 \right)}{r} \]
where:
- \( M \) is the regular monthly payment,
- \( r \) is the annual interest rate in decimal form,
- \( t \) is the term of the annuity in years.
For example, if you chose an annuity with a term of two years at 4.7% and a monthly payment of $100, the future value would be \$2511.27.
**Exercise:**
Recalculate the future value amount if you're willing to raise your monthly payment to $120 per month. Round your answer to the nearest cent.
**Future Value Calculation Submission:**
The future value would be $ ______________.
By using the given formula, you'll be able to determine the exact amount you would have in the future based on your adjusted monthly payments.
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