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22 May, 08:48

Brenda plans to reduce her spending by $110 a month. Calculate the future value of this increase in savings over the next 10 years. (Assume an annual deposit to her savings account, and an annual interest rate of 8 percent.) Use Exhibit 1-B. (Round time value factor to 3 decimal places and final answer to 2 decimal places.)

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  1. 22 May, 08:50
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    Future Value = $ 19122.312

    Step-by-step explanation:

    We know that,

    Amount by which Brenda plans to reduce her spending = $110

    Time Period of increase = 10 years

    Annual Interest Rate, r = 8 %

    Now,

    Annual Savings is given by,

    Annual Savings = Monthly reduction in spending x Number of Months per year

    Annual Savings = 110 x 12 = $1320

    Now,

    Future Value is given by,

    Future Value = Annual Savings x Future Value annuity Table factor

    and,

    Annuity Table Factor for n = 10 years at, r = 8 % is = 14.4866

    So,

    Future Value = 1320 x 14.4866

    Therefore, the Future Value is = $ 19122.312
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