Question 1157423: You decide to contribute to a mutual fund that averages 3.4% return per year. If you contribute $150 quarterly.
Round all answers to the nearest cent as needed.
a) How much will be in the account after 10 years? $
b) How much of this money did you deposit? $
c) How much of this money is interest earned? $
Answer by ikleyn(52787)   (Show Source):
You can put this solution on YOUR website! .
It works as a classic Ordinary Annuity saving plan with the annual deposit of 150*4 = 600 dollars, compounded annually at 3.4%.
The general formula is
FV =  , (1)
where FV is the future value of the account; P is the 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 = 600; r = 0.034; n = 10. So, according to the formula (1), you get at the end of the 10-th year
FV =  = $7006.39 dollars.
Note that you deposit only 10*$600 = $6,000. The rest, $1006.39 is the interest, which the account earns/accumulates in 10 years.
Solved.
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On Ordinary Annuity saving plans, see the lessons
- Ordinary Annuity saving plans and geometric progressions
- Solved problems on Ordinary Annuity saving plans
in this site.
The lessons contain EVERYTHING you need to know about this subject, in clear and compact form.
When you learn from these lessons, you will be able to do similar calculations in semi-automatic mode.
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