Question

miss m. Fuentes is planning to contribute $3,700 per year for the next 18 years to the retirement plan. she has 2 choices: certificate of deposit that pays 17% per year versus a stock fine that will yield 19 % per year find the future values of the stock fund

Answer 1

stock fund that will yield 19 % per year

contribute $3,700 per year for the next 18 years to the retirement plan.

find the future values of the stock fund

Here we need to calculate Future value of annuity payment

Future value = Annuity * Future value annuity factor, rate 19%, n 18

Annuity = 3700 per year

Rate = 19%

N = number payment period = 18

Future value annuity factor, r, n = ( ( 1 + r )^n - 1 ) / r

r = interest rate = 19%

n = number payment period = 18

Future value annuity factor, rate 19%, n 18 = ((1+19%)^18 - 1 ) / 19%

= (22.90052 - 1 ) / 19%

= 21.90052 / 19% = 115.2658

Or

We can find the Future value annuity factor, rate 19%, n 18 on Future value annuity factor table, 18 period row and 19% interest rate column.

Future value annuity factor, rate 19%, n 18 = 115.26586

Future values of the stock fund = 3700 * 115.26586 = $426483.68