Andrea Shertov dreams of spending an extended holiday in Thailand. If she can sa

Question

Andrea Shertov dreams of spending an extended holiday in Thailand. If she can
save enough money, she wants to have six months to travel with friends. She has
done some research and determined that she would need approximately $1800 in
Canadian currency per month to achieve her dream.
At her current salary, she plans to save $150 at the end of each month, invest-
ing it at 2.8% interest compounded monthly. She hopes to be able to take this trip
three years from now.

(3) If Andrea saves $300 per month for three years, with interest at 5.5% com-
pounded monthly, how much will she have in her vacation investment
account?

Explanation / Answer

I will solve this with the help of a financial calculator Texas BA II plus

Solution

PMT = -300, I= 5.5/12 =0.4583 , N= 3 *12 = 36 , CPT FV = 11713

or direct formula can be applied

FV = A ((1+i)^n - 1) / i

= 300 ( 1.004583^36 - 1) / .004583

=11713

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