SOLUTION: You deposit $2000 each year into an account earning 7% interest compounded annually. How much will you have in the account in 20 years?

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Question 1122074: You deposit $2000 each year into an account earning 7% interest compounded annually. How much will you have in the account in 20 years?
Answer by ikleyn(52797) About Me  (Show Source):
You can put this solution on YOUR website!
.
There are two types of saving accounts that work in accordance with this scheme:

        a)  Ordinary Annuity saving plan,   and

        b)  Annuity Due saving plan.

Under Ordinary Annuity saving plan you deposit  $2000  at the end of each year;
under Annuity Due saving plan you deposit  $2000  at the beginning of each year.

I will give you the solution for the Ordinary Annuity plan only. 

     (When such a problem comes without explicit naming the plan, I am 100% sure that it means an Ordinary Annuity).

The formula is 

    The future value in 20 years = 2000%2A%28%28%281%2B0.07%29%5E20-1%29%2F0.07%29%29 = $81,990.98.


    Notice that you deposit only $2000*20 = $40,000.

    The rest is compound percents that the account earns in 20 years.

On both plans, you can learn and read from the lessons
    - Ordinary Annuity saving plans and geometric progressions
    - Annuity Due saving plans and geometric progressions
in this site.