SOLUTION: You deposit $5000 each year into an account earning 2% interest compounded annually. How much will you have in the account in 15 years?

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Question 1153226: You deposit $5000 each year into an account earning 2% interest compounded annually. How much will you have in the account in 15 years?
Answer by ikleyn(52812) About Me  (Show Source):
You can put this solution on YOUR website!
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It is a classic Ordinary Annuity saving plan. The general formula is 


    FV = P%2A%28%28%281%2Br%29%5En-1%29%2Fr%29,    (1)


where  FV is the future value of the account;  P is 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 = 5000;  r = 0.02;  n = 15.  So, according to the formula (1), you get at the end of the 15-th year


    FV = 5000%2A%28%28%281%2B0.02%29%5E15-1%29%2F0.02%29 = $86467.08.


Note that you deposit only  15*$5000 = $75,000.  The rest is the interest what the account earns/accumulates in 15 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.