Future Value and Benefits Honors Template

Some things are worth waiting for! Remember that $10,000 Great-Aunt
Rachel gifted you back in 02.03? Let’s say you put it away with the plan to
save it to buy yourself a new car when you turn 25.
For this assessment, you will determine the investment and contributions you
will need to make to have enough money for a large purchase. You will use
the future value formula to determine the investment you will need to make if
you do not contribute to the car savings fund. Then, you will use
acompounding interest calculator to determine how much you would need to
contribute monthly to help reach your goal quicker.
PART ONE
Determine what you are saving for and how much money you will need.
• Research your car. What kind of car do you want? What is the sticker
price?
• How many years until you turn 25?
• Review your interest rate options from your priorassessment or find a
new financial institution.
• What kind of financial product are you investing in (savings account,
CD, money market)?
• What’s the interest rate?
Type of Car Sports Car (Chevy Camaro)

Cost of Car $32,000

Years to Save 10

Type of Investment Money Market

Interest Rate 0.02%

Use the future value formula to see if your initial investment will cover the cost
of the car. Show your work.
FV = I x (1 + R) T
What is the difference between what you have saved and what the car costs?

Cost of Car $32,000

Total Investment $12,189.94

Difference $19,810.06

PART TWO
How can you make up the difference between what you saved and what you
still need to purchase the car? Sometimes, you need to help it along with
some additional contributions.
• Use a compound interest calculator, like the one found on Investor.gov.
• Input your initial investment ($10,000) as well as your interest rate and
the years your money will be invested.
• Input your monthly contribution. Start with $50 and increase in $50
increments until you reach the price of the car. Assume the
compounding frequency is annual.
• Keep track of your findings in the chart below. If you need them, you can
add more rows by clicking the tab button on the last row:
Original Monthly Interest Rate Length of Time in Total
Investment Contribution Years

$10,000.00 $50.00 0.02% 10 $ 2,000

PART THREE
Reflect on your findings. Write a paragraph describing what you learned about
saving for future expenditures.

One thing I learned about saving for my future expenditures would be the
formula to calculate future value. In algebra two, I have learned different
formulas including simple interest and compound interest. I have never once
used future value so when I read and learnt how to use it it helped me to
make connections and build an understanding of how these formulas are all
related in one way or another. So, in conclusion, I am happy to expand my
knowledge on how to calculate future value.