FV of Amount Invested = Amount Invested five years ago * (1 + r)(n + 5)
= $100,000 * (1 + 0.065)(20 + 5)
= $100,000 * 4.8277 = $482,769.91
FV of Annuity Due = Payment + Payment * [{1 - (1 + r)-(n-1)} / r]
= $200 + $200 * [{(1 + 0.065/12)[(20*12)-1] - 1} / (0.065/12)]
= $200 + $200 * [2.6367 / 0.0054]
= $200 + $200 * [486.7842]
= $200 + $97,356.84 = $97,556.84
Balance in Homer's Account 20 years from now = FV of Amount Invested + FV of Annuity Due
= $482,769.91 + $97,556.84 = $580,326.75
Get Answers For Free
Most questions answered within 1 hours.