elaine romberg prepares her own income - tax return each year. a tax preparer would charge her $70 for this…

elaine romberg prepares her own income - tax return each year. a tax preparer would charge her $70 for this service. over a period of 8 years, how much does elaine gain from preparing her own tax return? assume she can earn 2 percent on her savings. (exhibit 1 - b, exhibit 1 - c, exhibit 1 - d) note: do not round intermediate calculations. round your final answer to two decimals. future value of total gain

elaine romberg prepares her own income - tax return each year. a tax preparer would charge her $70 for this service. over a period of 8 years, how much does elaine gain from preparing her own tax return? assume she can earn 2 percent on her savings. (exhibit 1 - b, exhibit 1 - c, exhibit 1 - d) note: do not round intermediate calculations. round your final answer to two decimals. future value of total gain

Answer

Explanation:

Step1: Identify the annuity amount

The amount saved each year by preparing her own tax - return is $A = 70$.

Step2: Identify the interest rate and number of periods

The interest rate $r=0.02$ and the number of years $n = 8$.

Step3: Use the future - value of an ordinary annuity formula

The formula for the future value of an ordinary annuity is $FVA=A\times\frac{(1 + r)^{n}-1}{r}$. Substitute $A = 70$, $r=0.02$, and $n = 8$ into the formula: $FVA=70\times\frac{(1 + 0.02)^{8}-1}{0.02}$. First, calculate $(1 + 0.02)^{8}=1.02^{8}\approx1.171659$. Then, $(1.02^{8}-1)\approx0.171659$. $\frac{(1.02^{8}-1)}{0.02}=\frac{0.171659}{0.02}=8.58295$. $FVA=70\times8.58295 = 600.8065\approx600.81$.

Answer:

$600.81$