Question

Megan has a large and growing collection of animated movies. She wants to replace her old television with a new LCD model, so she has started saving for it. At the end of each year, she deposits $800 in her bank account, which pays her 4% interest annually. Megan wants to keep saving for 6 years and then buy the newest LCD model that is available. Megan’s savings are an example of an annuity. How much money will Megan have to buy a new LCD TV at the end of 6 years, rounded to the nearest whole dollar? $7,163 $4,510 $5,306 $5,518

Answer 1

Answer:

The correct answer is C: $5,306

Explanation:

Giving the following information:

At the end of each year, she deposits $800 in her bank account, which pays her 4% interest annually.

Megan wants to keep saving for 6 years and then buy the newest LCD model that is available.

We need to use the following formula of a final value:

FV= {A*[(1+i)^n-1]}/i

FV= 800*[(1.04^6)-1]/0.04= $5,306