Question

Dear Aunt Minnie was determined that you should go to college, so when you were born, she decided that on each of your birthdays she would invest $4,000 into an account paying 6% interest. On your 10th birthday, she was short on money and was unable to invest the $4,000 that year. She faithfully invested the $4,000 on all of your other birthdays. You just turned 18 today and Aunt Minnie made her last investment of $4,000. She then tells you what she has been doing. How much money do you have available for college today? Also, please show how to entering number in financial calculator HP 10bII+

Answer 1

First we need to calculate the value of all the payement at 18th year, Here we will be using the formula for Future value annuity

FV= P*(((1+r)^n-1))/r

=4000*((1.06^18)-1)/.06

= $123622.60

Now we need to reduce it by the value of investment in 10th Birthday

= 4000*(1.06^8)

= $6375.39

She will have today $123622.60-$6375.39= $117247.20

In BA II + Calculator ,Value of the payment will be calculated as below steps

1- Type -4000 then press PMT

2- Type 6 then press I/Y

3-Type 18 then press N

4- Press CPT then Press FV

You will get $123622.6102

Now value of Missed 4000 in 10th Year will be simple

Calculate 4000*(1.06^8) = $ 6375.39

Value today will be $123622.61-6375.39 = $117247.20