Question

Cost Benefit Analysis - If you deposit $2000 at the end of each month for 5 years, where the annual rate (r) is 9%. How much is in this account at the end of 10 years?

Answer 1

To know the value in the account after 10 years we first need to calculate the amount that will be there in the account after 5 years. For that we need to find the Future value of annuity of 2000 for 60 months at the rate (9/12)%. once we get the future value of this annuity we will see the future value of this lumpsum after 5 years from then @ 9% per annum. the monthly rate will be 9/12 = 0.75%

FV annuity of $2000 for 60 payments @0.75% = $150,848.27

the formula for the same is

FV of $150,848.27 @ 9% = $150,848.27 * (1+0.09)5

• = $232,098.76 Answer