Karen and Mike currently insure their cars with separate companies, paying $600
ID: 2729674 • Letter: K
Question
Karen and Mike currently insure their cars with separate companies, paying $600 and $800 a year. If they insured both cars with the same company, they would save 10 percent on the annual premiums. What would be the future value of the annual savings over 10 years based on an annual interest rate of 4 percent? Use Exhibit 1-B. (Round time value factor to 3 decimal places and final answer to 2 decimal places.)
Karen and Mike currently insure their cars with separate companies, paying $600 and $800 a year. If they insured both cars with the same company, they would save 10 percent on the annual premiums. What would be the future value of the annual savings over 10 years based on an annual interest rate of 4 percent? Use Exhibit 1-B. (Round time value factor to 3 decimal places and final answer to 2 decimal places.)
Karen and Mike currently insure their cars with separate companies, paying $600 and $800 a year. If they insured both cars with the same company, they would save 10 percent on the annual premiums. What would be the future value of the annual savings over 10 years based on an annual interest rate of 4 percent? Use Exhibit 1-B. (Round time value factor to 3 decimal places and final answer to 2 decimal places.) Future value
Explanation / Answer
Karen
Present Value= 800
saving Rate= 10%
Annual saving amount= (10% of 800)= 80 each year
rate = r = 4%
n=10 years
future value of the annual savings= PV *[(1+r)^n]/ r
FV= 80x12.0061= $960.49
Mike
Present Value= 600
saving Rate= 10%
Annual saving amount= (10% of 600)= 60
rate = r = 4%
n=10 years
future value of the annual savings= PV *[(1+r)^n]/ r
FV= 60x12.0061= $720.37
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