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8 December, 18:21

A grandmother deposited $1,000 in an account that pays 6% per year compounded annually when her granddaughter was born. What will the value of the account be when the granddaughter reaches her 17th birthday?

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  1. 8 December, 18:35
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    Answer: $2692.8

    Explanation:

    From the question, we are told that grandmother deposited $1,000 in an account that pays 6% per year compounded annually when her granddaughter was born. The value of the account be when the granddaughter reaches her 17th birthday goes thus:

    Future value = PV (1 + i) ^n

    where

    PV = present value = $1000

    I = interest rate = 6% = 0.06

    n = number of years = 17

    Future value = PV (1 + i) ^n

    = 1000 (1 + 0.06) ^17

    = 1000 (1.06) ^17

    = 1000 * 2.6928

    = $2692.8

    The value of the account will be $2692.8 when the granddaughter reaches her 17th birthday.
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