SOLUTION: $1500 is deposited every year in an account yielding 6% interest compounded annually, how much money will have been saved after 10 years?

Question 212105: $1500 is deposited every year in an account yielding 6% interest compounded annually, how much money will have been saved after 10 years?
Answer by drj(1380) (Show Source): You can put this solution on YOUR website!
$1500 is deposited every year in an account yielding 6% interest compounded annually, how much money will have been saved after 10 years?

Step 1. Money after First year = 1500*1.06 (Money after first year is bigger than initial investment. That's why 1.06 must be bigger than 1 where 6% is 0.06. Then add 1 to get 1.06)

Step 2. Money after Second year = First Year*1.06= 1500*1.06*1.06

Step 3. Money after Third year = Second Year*1.06= 1500*1.06*1.06*1.06

Step 4. Base on Steps 1-3, there is a pattern. So after n years then the general formula is

where n is the number of years and Pn is the amount of money after n years. In this case n=10 and payment after ten year is labelled as P10

Step 5. Solve equation in Step 4.

now
So

Step 6. So at the end of 10 years an initial investment of $1500 compounded annually at 6% is $2686.27. You almost doubled your money. You should double your money at the end of 12 years. You can check by substituting n=12.

Happy Investing! Dr J

For Step-By-Step Videos in Introduction to Algebra, please visit http://www.FreedomUniversity.TV/courses/IntroAlgebra.

For more questions in investing calculations, please contact Dr J at john@e-liteworks.com.

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