Question

You deposit $1,400 at the end of each year into an account paying 10.6 percent interest. a. How much money will you have in the account in 24 years? b. How much will you have if you make deposits for 48 years?

Answer 1

This is a future value problem

Here periodical payment is PMT = 1400

Interest earned is I = 10.6% per annum

Beginning value is assumed to be 0 and payment starts after year PV = 0

A. Here number of years is N = 24

Future value of investment at end of 24 years using a financial calculator after inputting all the above details is $135025.56

B. Here number of years is N = 48

Future value of investment at end of 48 years after inputting all above details is $1650466.59

The above can also be calculated manually using the formula below using the same inputs as above.

FV = PV(1+r/k)^nk+ PMT ((1+r/k)^nk-1)/(r/k))×(1+(r/k))