Question 1183164: You deposit $100 each quarter into an account earning 7.7% Interest compounded quarterly. A. How much will you have in the account in 15 years? B. How much total money will you put into the account? C. How much total interest will you earn?
Answer by ikleyn(52781)   (Show Source):
You can put this solution on YOUR website! .
You deposit $100 each quarter into an account earning 7.7% Interest compounded quarterly.
A. How much will you have in the account in 15 years?
B. How much total money will you put into the account?
C. How much total interest will you earn?
~~~~~~~~~~~~~~~~~~~
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 quarterly payment (deposit);
r is the quarterly percentage yield presented as a decimal;
n is the number of deposits (= the number of years multiplied by 4, in this case).
Under the given conditions, P = 100; r = 0.77/4; n = 4*15 = 60.
So, according to the formula (1), you get at the end of the 15-th year
FV =  =  = $11,113.64.
Note that you deposit only 4*15*$100 = $6,000. The rest, $11,113.64 - $6000 = $5,113.64 is what the account earns/accumulates in 15 years.
-----------------
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.
|
|
|
