Q:

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.)

Accepted Solution

A:
Answer:Future Value = $ 19122.312Step-by-step explanation:We know that,Amount by which Brenda plans to reduce her spending = $110Time Period of increase = 10 yearsAnnual Interest Rate, r = 8 %Now,Annual Savings is given by,Annual Savings = Monthly reduction in spending x Number of Months per yearAnnual Savings = 110 x 12 = $1320Now,Future Value is given by,Future Value = Annual Savings x Future Value annuity Table factorand,Annuity Table Factor for n = 10 years at, r = 8 % is = 14.4866So,Future Value = 1320 x 14.4866Therefore, the Future Value is = $ 19122.312