Question 1169208: You deposit $4000 each year into an account earning 4% interest compounded annually. How much will you have in the account in 20 years?
Answer by ikleyn(52793)   (Show Source):
You can put this solution on YOUR website! .
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 = 4000; r = 0.04; n = 20. So, according to the formula (1), you get at the end of the 20-th year
FV =  = $119,112.31.
Note that you deposit only 20*$4000 = $80,000. The rest is the interest what the account earns/accumulates in 20 years.
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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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