Your grandfather put some money into an account for you on the day you were born. You are now 18 years old and are allowed to withdraw the money. The account currently has $ 4 comma 909 in it and pays an interest rate of 3 %. a. How much money would be in the account if you left the money there until your 25th birthday? b. What if you left the money until your 65th birthday? c. How much money did your grandfather originally put into the account?

Question

Konnor

Business

6 October, 18:21

Your grandfather put some money into an account for you on the day you were born. You are now 18 years old and are allowed to withdraw the money. The account currently has $ 4 comma 909 in it and pays an interest rate of 3 %. a. How much money would be in the account if you left the money there until your 25th birthday? b. What if you left the money until your 65th birthday? c. How much money did your grandfather originally put into the account?

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Answers (1)

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Justine Gill · Answer 1

Instructions are below.

Explanation:

Giving the following information:

Value at 18 = $4,909

Interest rate = 3%

To calculate the final value, we need to use the following formula:

FV = PV * (1+i) ^n

A) Number of years = 7

FV = 4,909 * (1.03^7) = $6,307.45

B) Number of years = 47

FV = 4,909 * (1.03^47) = $19,694.39

C) Finally, we need to determine the original investment. We need to isolate the present value from the formula:

PV = FV / (1+i) ^n

PV = 4,909 / (1.03^18)

PV = $2,883.52