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4 January, 00:34

Frances loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $700 in her local bank, which pays her 9% annual interest. Frances decides that she will continue to do this for the next 5 years. Frances's savings are an example of an annuity. How much will she save by the end of 5 years, rounded to the nearest whole dollar?

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  1. 4 January, 00:43
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    Future Value = $4,189.30

    Explanation:

    Giving the following information:

    Investment = $700 annual

    Interest rate = 9%

    Frances decides that she will continue to do this for the next 5 years.

    To calculate the final value, we need to use the following formula:

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

    A = annual deposit

    FV = {700*[ (1.09^5) - 1]} / 0.09

    FV = $4,189.30
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