newconnect.mheducation.com/flow/connect.htm Saved Beverly and Kyle Nelson curren
ID: 2804328 • Letter: N
Question
newconnect.mheducation.com/flow/connect.htm Saved Beverly and Kyle Nelson currently insure their cars with separate companies, paying $600 and $610 a year. If they insured both cars with the same company, they would save 20 percent on the annual premiums What would be the future value of the annual savings over 10 years based on an annual interest rate of 5 percent? Use Exhibit 1-B. (Do not round intermediate calculations Round time value factor to 3 decimal places and final answer to 2 decimal places.)Explanation / Answer
Future value of annual savings:
= Saving in each year×FVIFA(5%,10)
= ($610-$600+$600*20%)×12.578
= $130×12.578
= $1,635.14
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