Question

You invested $1000 on September 2, 2010,

$1000 on September 2, 2011,

$1000 on September 2, 2012,

$1000 on September 2, 2013,

$1000 on September 2, 2014,

$1000 on September 2, 2015,

$1000 on September 2, 2016,

$1000 on September 2, 2017,

$1000 on September 2, 2018,

$1000 on September 2, 2019.

What is the value of those investments the instant after you invest the $1000 on September 2, 2019?

Assume an interest rate of 15%, compounded annually.

Answer 1

Correct Answer:

The value of the investment after 9 years (2010-2019) at 15% will be $ 19,303.72

Working:

Since the deposit is made at the beginning of the month, it is an annuity due.

Formula for Future value of Annuity Due is as follows.

FV of Annuity Due

A/R*{(1+R)^N -1}*(1+R)

Putting the values into the formula:

FV of Annuity Due
A	$    1,000.00
R	15%
N	9
FV of Annuity Due
A/R	$    6,666.67
1+R	1.15
(1+R)^N	3.52
{(1+R)^N-1}	2.52
A/R*{(1+R)^N -1}*(1+R)	$ 19,303.72

End of Answer.

Thanks