   Chapter 6.1, Problem 81E ### Calculus: An Applied Approach (Min...

10th Edition
Ron Larson
ISBN: 9781305860919

#### Solutions

Chapter
Section ### Calculus: An Applied Approach (Min...

10th Edition
Ron Larson
ISBN: 9781305860919
Textbook Problem
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# Finance: Future Value Use the equation from Exercises 79 and 80 to calculate the following. (Source: Adapted from Garman/Forgue, Personal Finance, Eighth Edition)(a) The future value of $1200 saved each year for 10 years earning 7 % interest(b) A person who wishes to invest$1200 each year finds one investment choice that is expected to pay 9 % interest per year and another, riskier choice that may pay 10 % interest per year. What is the difference in return (future value) if the investment is made for 15 years?

(a)

To determine

To calculate: The future value if $1200 saved each year for 10 years earning 7% interest by using the equation from exercise 79 and 80. Explanation Given information: Interest rate is 7% for the time period of 10 years. Formula used: t1t2ertdt=ert2rert1r Calculation: Consider the future value from exercise 79 and 80, Future value=ert10t1f(t)ertdt Where r is interest rate and t1 is time period. Here the Interest rate that is, r=7%=0.07 The time period that is t1=10 years and saved$1200 each year so f(t)=1200.

Now substitute all the values in the future formula as:

Future value=e(0

(b)

To determine

To calculate: The future value difference if one $1200 saved each year for 15 years earning 9% interest and another$1200 saved each year for 15 years earning 10% interest by using the equation from exercise 79 and 80.

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