SOLUTION: trader needs ₦300,000 to improve her business, she deposits ₦110,000 in her savings account at 5% per annum compound interest. she then adds ₦50,000 to her savings at the end

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Question 1142568: trader needs ₦300,000 to improve her business, she deposits ₦110,000 in her savings account at 5% per annum compound interest. she then adds ₦50,000 to her savings at the end of each year.
a) Find her total savings after 3 years.
b) By how much is her savings greater or lesser than ₦300,000 at the end of the third year.

Found 2 solutions by ikleyn, MathTherapy:
Answer by ikleyn(52786)   (Show Source): You can put this solution on YOUR website!
.

            Although the problem does not say directly and explicitly that the account is compound annually, I will assume
            by default that it is so. 


Her account works as if she has two saving plans for 3 years each:


    - first plan is one-time deposit of ₦ 110000 at 5% APY interest compounded annually,  and

    - the second plan is the Ordinary annuity saving plan with annual deposits of  ₦ 55000 at 5% APY interest compounded annually.


So, her total Future Value is the sum of the Future Values of both of these saving plans.



For the first plan,  FV1 =  = 127338.75.


For the second plan,  FV2 =  = 173387.50.


The total Future Value is  FV = FV1 + FV2 = 127338.75 + 173387.50 = 300726.25.



ANSWER.  The total future value is  ₦ 300726.25,  and it is  ₦ 726.25  greater than  ₦ 300000.


-------------

On ordinary annuity saving plans,  see my lessons
    - Ordinary Annuity saving plans and geometric progressions
    - Solved problems on Ordinary Annuity saving plans
in this site.


/\/\/\/\/\/\/\/

Regarding the post by @MathTherapy, it is difficult to me to comment it, since the post does not contain NEITHER setup NOR calculations.



Answer by MathTherapy(10552)   (Show Source): You can put this solution on YOUR website!

trader needs ₦300,000 to improve her business, she deposits ₦110,000 in her savings account at 5% per annum compound interest. she then adds ₦50,000 to her savings at the end of each year.
a) Find her total savings after 3 years.
b) By how much is her savings greater or lesser than ₦300,000 at the end of the third year. 
 

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