Ashley has a large and growing collection of animated movies. She wants to repla

Question

Ashley has a large and growing collection of animated movies. She wants to replace her old television with a new LCD model, so she has started saving for it. At the end of each year, she deposits $500 in her bank account, which pays her 11% interest annually. Ashley wants to keep saving for five years and then buy the newest LCD model that is available. Ashley's savings are an example of an annuity. How much money will Ashley have to buy a new LCD TV at the end of five years? O $3,113.90 $1,847.95 o $3,456.43 o $2,646.82 If Ashley deposits the money at the beginning of every year and everything else remains the same, she will save by the end of five years

Explanation / Answer

Annuity = 500
Rate = 11%
Time = 5 years
FV = Annuity *(1+r)n -1)/r = 500*((1+11%)5 -1)/11% = 3113.90

If Deposit is at beginning of year then
FV = (1+r)*Annuity *(1+r)n -1)/r =(1+11%)*500*((1+11%)5 -1)/11% = 3456.43

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