OpenStudy (anonymous):

Finance Help?

3 years ago
OpenStudy (anonymous):

Jack starts to save at age 40 for a vacation home that he wants to buy for his 50th birthday. He will contribute $1000 each quarter to an account, which earns 2.1% interest, compounded annually. What is the future value of this investment, rounded to the nearest dollar, when Jack is ready to purchase the vacation home? 3 years ago OpenStudy (anonymous): uniform series equation, do you have it? 3 years ago OpenStudy (anonymous): No I used the future value of an ordinary annuity formula 250*(((1+.00525)^(40)-1)/(.00525)) and got 11,095.26 3 years ago OpenStudy (anonymous): thats the right eq. where did the value of 250, .00525 and 40 come from in the problem? 3 years ago OpenStudy (anonymous): 1000 compounded quarterly is 250. 2.1% compounded quarterly is .00525 (I think this part is incorrect and should stay 2.1 since the problem says compounded annually but when I use that I get 15,432.20). 40 is the amount of years (10) multiplied by the amount of periods per year (4) 3 years ago OpenStudy (anonymous): I can see what you are thinking, but I believe we need to get everything in terms of years, since the interest is compounded annually (yearly) 3 years ago OpenStudy (anonymous): 1000 quarterly becomes 4000 yearly i is still 0.021 n is 10 make sense? 3 years ago OpenStudy (anonymous): because it dosen't mater if he put the money in every 3 months or just all at once for the year, becuase the interest isn't compounded continuously 3 years ago OpenStudy (anonymous): Oooohh, I see. So now I have 4000*(((1+.021)^(10)-1)/(.021)) and my answer is 43,999.65 which rounds to$44,000

3 years ago
OpenStudy (anonymous):

Thank you :)

3 years ago
OpenStudy (anonymous):

^_^ these problems get tricky!

3 years ago
OpenStudy (anonymous):

They do but thanks again

3 years ago