Planning for the Future: Saving Money for Dad's Funeral
Calculating the Future Value for Dad's Funeral
Imagine a scenario where you convince your Dad to put his weekly cigarette money into an account that pays 11% annually. If he unfortunately passes away in 11 years, how much will you have to spend on his funeral if his weekly habit was $40?
Final answer: The question is asking for the future value of an annuity where the father saves the money he used to spend on cigarettes. It can be solved with the Future Value formula for an annuity. The answer gives the total amount that can be used for the funeral.
Explanation: This question can be solved by using the formula for the Future Value of an Annuity. The weekly savings is $40 and we have 52 weeks in a year, resulting in an annual deposit of $2080. The annual interest rate is 11%. Since this is compound annually, we need to maintain the rate as it is. With a term of 11 years, we input these values into the formula:
FV = P * [(1 + r)^n - 1] / r
Where FV is the future value of the savings, P is the annual deposit, r is the annual interest rate, and n is the number of years. Substituting the values, we get:
FV = 2080 * [(1 + 0.11)^11 - 1] / 0.11
This calculation gives us the future value of the savings, which would be the total amount available for the funeral.
I just talked my Dad into putting his weekly cigarette money into an account that pays 11% annually. If he dies in 11 years, how much will I have to spend on his funeral if his weekly habit was $40? The question is asking for the future value of an annuity where the father saves the money he used to spend on cigarettes. It can be solved with the Future Value formula for an annuity. The answer gives the total amount that can be used for the funeral. Explanation: This question can be solved by using the formula for the Future Value of an Annuity. The weekly savings is $40 and we have 52 weeks in a year resulting in an annual deposit of $2080. The annual interest rate is 11%. But since this is compound annually, we need to keep the rate as it is. Since the term is 11 years, we input these values into the formula: FV = P * [(1 + r)^n - 1] / r Here, P is the annual deposit, r is the annual interest rate, and n is the number of years. Hence we have, FV = 2080 * [(1 + 0.11)^11 - 1] / 0.11 This gives the future value of the savings which would be the total amount available for the funeral.