Question

Igor puts 4000 every year into an account earning a 4.5% annual interest rate compounded annually.

a. How much is in the account after 15 years? (1 point)  dollars

Show your work. (8 points)




b. How much interest did the account earn? (1 point)  dollars

Show your work. (4 points)

Answer 1

Information provided:

Annual deposit= $4,000

Time= 15 years

Interest rate= 4.5%

a.The question is solved by calculating the future value.

Enter the below in a financial calculator to compute the future value of ordinary annuity:

PMT= -4,000

N= 15

I/Y= 4.5

Press the CPT key and FV to compute the future value.

The value obtained is 83,136.22.

Therefore, the account will have $83,136.22 in 15 years.

b.Interest= $83,136.22 - ($4,000*15)

= $83,136.22 - $60,000

= $23,136.22.