Question

Joe Blow deposits $2,400 at the end of each quarter for 35 years into an account paying 11% compounded quarterly. How much is in Joe's account at the end of the 35 years? (Round your answer to the nearest cent.)
$

(b) How much interest does Joe earns on his deposits?
$

Answer 1

Solution

Formula for future value of annuity (Periodic payment) is given below

Future value of annuity=Annuity amount*(((1+r)^n)-1)/r

Where

r-intrest rate per period-11/4=2.75% per quarter

n-number of periods-35*4=140

Annuity amount=2400

Putting values in formula

Future value of annuity=2400*(((1+.0275)^140)-1)/.0275

Future value of annuity=$3806179.27 ( Amount in Joe's account at the end of the 35 years)

Now

Intrest earned=Total amount at end of 35 years-Total amount of investment made

Total amount of investment made=Each amount deposited*Number of deposits made

Total amount of investment made=2400*140=336000

Thus

Intrest earned=3806179.27-336000

Intrest earned=$3470179.27

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