SOLUTION: Do you know what formula to use in solving this problem? Also could I get an example of the formula being applied to the question? Here is the question. You deposit $40 at the end

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Question 585221: Do you know what formula to use in solving this problem? Also could I get an example of the formula being applied to the question? Here is the question. You deposit $40 at the end of every six months into an annuity with 5% interest compounded semiannually. How much interest will have accumulated after 25 years? Do not round until the final answer. Then round to the nearest dollar as needed.
Answer by ankor@dixie-net.com(22740) About Me  (Show Source):
You can put this solution on YOUR website!
Do you know what formula to use in solving this problem? Also could I get an example of the formula being applied to the question? Here is the question. You deposit $40 at the end of every six months into an annuity with 5% interest compounded semiannually. How much interest will have accumulated after 25 years? Do not round until the final answer. Then round to the nearest dollar as needed.
:
A Annuity formula: FV = P * %28%281%2Br%29%5En-1%29%2Fr; where
FV = final value
P = payment
r = interest rate (per period)
n = number of periods
:
In this example
p = 40
r = .05/2 = .025 interest rate for 6 mo
n = 2 * 25 = 50 periods
:
FV = 40 * %28%281%2B.025%29%5E50-1%29%2F.025
FV = 40 * %28%281.025%29%5E50-1%29%2F.025
FV = 40 * %28%283.43711-1%29%29%2F.025
FV = 40 * %28%282.43711%29%29%2F.025
FV = 40 * 97.58435
FV = $3899.37 is the final value
However you wanted to know how much of this was interest
The amt you paid into this in 50 payments, subtracted from the final value
Int = 3899.37 - (40*50)
Int = $1899.37 was interest