Javier is currently paying 

​$1 comma 2001,200 

in interest on his credit cards annually.​ If, instead of paying​ interest, he saved this amount every​ year, how much would he accumulate in a​ tax-deferred account earning 

77 

percent over 

1111​, 

1616​, 

or 

2121 

​years?  

​Note: Round intermediate computations to at least five​ (5) decimal places.

Click on the table icon to view the FVIFA​ table: 

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Part 1

​If, instead of paying​ interest, this amount was saved every year in a​ tax-deferred account earning 

77​% 

over 

1111 

​years, the amount accumulated would be 

​$enter your response here.

  ​(Round to the nearest​ cent.)

To calculate the future value of Javier's savings if he saves $1,200 annually in a tax-deferred account earning 7% interest over 11 years, we can use the future value of an annuity formula:

\[
FV = P \times \frac{(1 + r)^n - 1}{r}
\]

Where:
- $ FV $ = future value
- $ P $ = annual payment ($1,200)
- $ r $ = annual interest rate (7% or 0.07)
- $ n $ = number of years (11)

Let's calculate it step by step.

1. Calculate $(1 + r)^n$:
   \[
   (1 + 0.07)^{11} \approx 2.25219
   \]

2. Subtract 1:
   \[
   2.25219 - 1 = 1.25219
   \]

3. Divide by $ r $:
   \[
   \frac{1.25219}{0.07} \approx 17.74671
   \]

4. Multiply by $ P $:
   \[
   FV \approx 1,200 \times 17.74671 \approx 21,295.45
   \]

Therefore, if Javier saves $1,200 every year in a tax-deferred account earning 7% for 11 years, the amount accumulated would be approximately **$21,295.45**.

Would you like to know the accumulated amounts for 16 or 21 years as well? Here are some follow-up questions:

1. How would the accumulated amount change if the interest rate were higher or lower?
2. What are the impacts of compounding frequency on the final amount?
3. How does the length of time affect the total savings?
4. What strategies could Javier use to reduce his credit card interest payments?
5. What are the benefits of using a tax-deferred account for savings? 

**Tip:** Regular contributions to a savings or investment account can significantly increase your wealth over time due to the power of compounding interest.

Javier is currently paying $1,200 in interest on his credit cards annually. If, instead of paying interest, he saved this amount every year, how much would he accumulate in a tax-deferred account earning 7 percent over 11, 16, or 21 years?

Discover how saving $1,200 annually in a tax-deferred account at a 7% interest rate can lead to significant savings over time. This guide covers calculations for 11, 16, and 21 years, providing detailed insights into future value annuities.

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