Question

You deposit $4000 each year into an account earning 3% interest
compounded annually. How much will you have in the account in 25
years?

Answer #1

Annuity is the equal payent at regular interval.So this is the case of future value of annuity. | |||||||||||

Future Value of annuity | = | Annuity x Future Value of annuity of 1 | |||||||||

= | $ 4,000 | x | 36.4593 | ||||||||

= | $ 1,45,837.06 |
||||||||||

Working: | |||||||||||

Future Value of annuity of 1 | = | (((1+i)^n)-1)/i | Where, | ||||||||

= | (((1+0.03)^25)-1)/0.03 | i | 3% | ||||||||

= | 36.4593 | n | 25 | ||||||||

Thus, | |||||||||||

It will have in 25
years |
$ 1,45,837.06 |
||||||||||

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