Answer to Question #283034 in Finance for dksb

Question

 

You decide to begin saving towards the purchase of a new laptop in 3 years. If you put RM 1,000 at the end of each of the next 3 years in a savings account paying 4 percent compounded annually, how much will you accumulate after 3 years? What would be the ending amount if the payments were made at the beginning of each year? 

Answer 1

i)Payment made at the end of the year(annuity arrea)

n=3 years

Level payment=RM 1000

i= 4%

$Accumulated_{amount}=1000[{(1+0.04)^3-1\over 0.04}]=RM3121.6$

ii)Payment made at beginning of the year (annuity immediate)

$Accumulated_{amount}=1000[{(1+0.04)^3-1\over 0.04}](1+0.04)=RM3246.464$