Veronica plans to make a $95 a month annuity payment to an account that earns 3% annual interest to build up her savings. How much can she save in 10 years with this plan?
I think the answer is D but I'm not very good at this stuff... Please help it's URGENT!!!
Since Veronica earns 3% or 0.03 annual (per year) interest, the amount she earns in ten years will be (0.03)^10.
We can easily write an equation that shows how much Veronica wants to earn.
Hope this helped!
For payments made at the BEGINNING OF THE MONTH (payment due annuity)
P=PMT×((1+r)n−1)/r × (1+r)
For payments made at the END OF THE MONTH (ordinary annuity....more common)
P =PMT X ((1+r)n -1)/r I'll use this one
PMT = 95 r = 3%/12months = .0025 % per month n = 10 years * 12 months/year = 120 months
P = 95 ( ( 1+.0025)120 -1 ) / .0025 = $ 13 275.43