Question 1172324: Q: Determine amount of money after 40 years at 7 percent annual yield, investing $25/week.
Found 2 solutions by 1984aleem, ikleyn:
Answer by 1984aleem(1)   (Show Source):
You can put this solution on YOUR website! Ans: In one year there are 52 weeks so if some invest 25 dollars per week this means in one year total 1300 dollars are invested.
If we have annual increase of 7% per year. Then after 40 years the amount of money will be given by following formulas:
1300 . (1.07)^40 = 19, 466.795191 us dollars (Ninteen Thousand Four Hundred Sixty Six Dollars with the addition of .795191 part of one dollar.)
Answer by ikleyn(52756)  (Show Source):
You can put this solution on YOUR website! .
I will assume that not only $25 is invested weekly, but that the account is compounded weekly, too.
Then the problem is about the future value for Ordinary Annuity saving plan.
The formula for the Ordinary Annuity saving plan is
f =  ,
f is the future value
p is the weekly payment
r is the interest rate per time period
n is the number of time periods.
In your problem:
time periods are weeks.
p = 25 dollars
r = 0.07/52 per week
n = 40 * 52 = 2080 weeks (counting 52 weeks in the year)
formula becomes f =  = 286254.65 dollars (rounded to the closest cent).
So, the future value is $286254.65 after 40 years.
Interesting, that the total direct investment will be only $25*52*40 = $52000.
The rest is the interest the account earns/accumulates due to compounding.
Solved.
---------------------
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.
|
|
|
