Question

You deposit $1,300 at the end of each year into an account paying 11.6 percent interest. Required: (a) How much money will you have in the account in 16 years? (b) How much will you have if you make deposits for 32 years? rev: 09_17_2012

Answer 1

Answer to A

P = PMT [((1 + r)n - 1) / r]

P = 1300 [((1 + 0.116)16 - 1) / 0.116]

P = 1300 [((5.18756) / 0.116}]
P = 1300 x 44.720 = $58136.42
Where:-

P = The future value of the annuity stream to be paid in the future

PMT = The amount of each annuity payment

r = The interest rate

n = The number of periods over which payments are made

Answer to B

P = PMT [((1 + r)n - 1) / r]

P = 1300 [((1 + 0.116)32 - 1) / 0.116]

P = 1300 [((30.0324) / 0.116}]
P = 1300 x 258.899 = $336570
Where:-

P = The future value of the annuity stream to be paid in the future

PMT = The amount of each annuity payment

r = The interest rate

n = The number of periods over which payments are made