SOLUTION: A 12-year-old child received an inheritance of $3000 per year. This was to be invested and allowed to accumulate until the child reached 21 years of age. The first payment was made

Question 1148489: A 12-year-old child received an inheritance of $3000 per year. This was to be invested and allowed to accumulate until the child reached 21 years of age. The first payment was made on the child's 12th birthday and the last on the 21st birthday. If the money was invested at 5.5% compounded annually, what did the child receive at age 21? (Round your final answer to two decimal places.)

Answer by ikleyn(52781) (Show Source): You can put this solution on YOUR website!
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It is a classic Ordinary Annuity saving plan. The general formula is 


    FV = ,    (1)


where  FV is the future value of the account;  P is your annual payment (deposit); r is the annual percentage rate presented as a decimal; 
n is the number of deposits (= the number of years, in this case).


Under the given conditions, P = 3000;  r = 0.055;  n = 10 (the number of the 3000 deposits).  
So, according to the formula (1), you get at the 21-th birthday


    FV =  = $38626.06.    ANSWER

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- Ordinary Annuity saving plans and geometric progressions
- Solved problems on Ordinary Annuity saving plans
in this site.

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When you learn from these lessons, you will be able to do similar calculations in semi-automatic mode.

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