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Karen and mike currently insure their cars with separate companies, paying $700 and $900 a year. if they insure both cars with the same company, they would save 10 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 4 percent

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talkingturkey
Given:
Karen - 700
Mike - 900
Same insurance company, they will save 10% on annual premiums.
period - 10 years
annual interest rate - 4%

Total Annual Premium:
700 + 900 = 1600 

Annual Savings:
1600 * 10% = 160

New Annual Premium:
1600 - 160 = 1,440

Future Value of Annual Savings:

FV = PV * FV factor for n = 10 ; i = 4%

FV = 160 * (1.04)¹⁰
FV = 160 * 1.480
FV = 236.80

The future value of the annual savings is 236.80.


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