I am working on annuities and this one annuity is really difficult. the question is Kristy Joe deposits $160 each month in an ordinary annuity to save for a new car. If the annuity pays a monthly interest rate of 0.66% how much will she be able to save in 5 years? Assume that the compounding is being done monthly.The answer I have come up with are 11,337.04 but the correct answer is apparently 11,731.81. How is this possible?

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Asked Sep 26, 2019
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I am working on annuities and this one annuity is really difficult. 

the question is Kristy Joe deposits $160 each month in an ordinary annuity to save for a new car. If the annuity pays a monthly interest rate of 0.66% how much will she be able to save in 5 years? Assume that the compounding is being done monthly.

The answer I have come up with are 11,337.04 but the correct answer is apparently 11,731.81. How is this possible?

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Expert Answer

Step 1

Given information:

Periodic payment (P)= $160

Rate of interest (i) = 0.66% = 0.0066

Compounded monthly (n) = (5)(12) = 60

Step 2

Future value of annuity formula:

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P[+1)-1 where P is the periodic payment, i is the rate per period F i and n is the number of periods.

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