Question

You deposit $3000 each year into an account earning 6% interest compounded annually. How much will you have in the account in 35 years?

Answer #1

We can use the future value of annuity formula to calculate the total amount in the account in 35 years. | |||||||

The formula is as under, | |||||||

FV of annuity = P*{[(1+r)^n - 1]/r} | |||||||

FV of annuity = future value of annuity = ? | |||||||

P = Periodic payment i.e.yearly deposit = $3000 | |||||||

r = rate of interest per annum = 6% | |||||||

n = number of years = 35 | |||||||

FV of annuity = 3000*{[(1+0.06)^35 - 1]/0.06} | |||||||

FV of annuity = 3000*111.4348 | |||||||

FV of annuity = 334304.34 | |||||||

The total amount you
have in the account in 35 years is $3,34,304.34 |
|||||||

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