Question

2) If you invest $8,900 per period for the following number of periods, how much would you have: Use Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a. In 7 years at 9 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Future value $ _________

b. In 25 years at 9 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Future value $_________

Answer 1

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

a.

A=$8900(1.09)^6+$8900(1.09)^5+.............+$8900(1.09)^1+$8900

=$8900[(1.09)^6+(1.09)^5+............+(1.09)^1+1]

=$8900*9.200434676

which is equal to

=$81883.87(Approx)

2.

A=$8900(1.09)^24+$8900(1.09)^23+..............+$8900(1.09)^1+$8900

=$8900[(1.09)^24+(1.09)^23+...........+(1.09)^1+1]

=$8900*84.70089623(Approx)

which is equal to

=$753,837.98(Approx).