You are in college and currently do not need a car because you are able to use public transportation. However, in 4 years you would like to purchase a car and you plan to have $10,000 saved. If you put away $200 in a systematic savings account at 3.2% interest every month, would you have $10,000 at the end of 4 years to use toward the purchase of your car? Show your work. Explain your rationale.
We are asked a question that may involve an ordinary annuity. The plan is to make $200 pay-ments each month into a savings account that pays a 3.2% interest rate compounded monthly.
We would like to know how much money would accumulate in this annuity
after 4 years. We therefore use the formula below: