Question

Suppose Miss Roxanne Davenport is 25 years old right now and puts away $1,800 per quarter in an account that returns 6% interest.

a.) How much will be in the account when she turns 65?

b.) What is her total contribution to the account?

c.) How much interest did she earn?

Answer 1

a) Miss roxanne davenport is 25 years old. and puts away $1800 per quarter i.e, 4 times in a year @ interest 6%

cal.of amount how much will be in the account when she turns 65

Total number of year deposited 40 years

Total number of times deposited 40*4= 160 times

now we can find out the final amount in the account using future value of annuity

A=P (1+r)ⁿ-1/r

P=1800, r=6/4%=1.5%=0.015

A=1800*(1+0.015)¹⁶⁰-1/0.015

A= $1179416

b) Miss Roxanne contribution is

40 years*4times*1800=$288000

c) Interest earned = Final amount - amount contributed

= 1179416-288000

=$891416