Question 1152996: You deposit $2500.00 into a savings plan at the end of each year for 3 years. The interest rate is 9.1% per year compounded annually. Find the value of annuity and the interest gained. Please show me in annuities formula.
Thank you,
SYL
Answer by ikleyn(52852)   (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 = 2500; r = 0.091; n = 3. So, according to the formula (1), you get at the end of the 3-th year
FV =  = $8203.20.
Note that you deposit only 3*$2500 = $7500. The rest, 8203.20 - 7500.00 = 703.20, is the interest
that your account earns/accumulates in 3 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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