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Ty is entering high school and is determined to save money for college. Ty feels he can save $2,500 each year for the next four years from his part-time job. If Ty is able to invest at 8%, how much will he have when he starts college?

S12A-15 (similar to) Question Help • Ty is entering high school and is determined to save money for college. Ty feels he can
O Reference 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 Periods 1% 0.990 0.980 0.971 10.961 5 0.951 0.942 0.933 8 0.9
/ / i Reference / / 1 189 / se 5% e Periods 1 2 3 4 5 6 7 8 9 1% 1.010 1.020 1.020 1.040 1.030 1.061 1.041 1.082 1.051 1.104
* Reference Periods 15% 0.870 1.626 2.283 16% 0.862 1.605 18 0.8 1.5 2.6 3.1 Present Value of Ordinary Annuity of $1 1% 2% 3%
Reference Periods 1% 1.000 2.010 3.030 4.060 5.101 6.152 7.214 8.286 9.369 10.46 11.57 12.68 13.81 14.95 16.10 17.26 18.43 19
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Answer #1

Since Ty is able to save the equal amount every year, Future value of annuity table will be used to calculate the future value of his savings.

Future Value Annuity factor (8%, 4 years) = 4.506 (From Table No.4)

Annual Savings = $ 2,500

Interest rate = 8 %

Future value of savings = Annual savings * Future value annuity factor

= $ 2,500 * 4.506

= $ 11,265

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