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8 April, 15:56

Shaan and Anita currently insure their cars with separate companies, paying $790 and $645 a year. If they insure both cars with the same company, they would save 10 percent on their annual premiums. What would be the future value of the annual savings over 8 years based on an annual interest rate of 5 percent

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  1. 8 April, 16:06
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    The future value of annual savings is $1,370.30

    Explanation:

    The amount of annual savings = (Shaan's premium + Anita's premium) * 10%

    Shann's premium is $790

    Anita's premium is $645

    Annual savings = ($790+$645) * 10%

    =$143.5

    The future value formula is given below:

    =-fv (rate, nper, pmt,-pv)

    rate is 5% annual interest rate

    nper is the 8 years that is the duration of investment

    pmt is the annual savings of $143.5

    pv is the total amount invested now which is zero

    =-fv (5%,8,143.5,0)

    fv=$ 1,370.30
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