You want to go to europe 5 years from now, and you can save $3,800 per year, beginning one year from today. you plan to deposit the funds in a mutual fund that you think will return 8.5% per year. under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?

Question

Zoe Rivas

Mathematics

13 November, 01:37

You want to go to europe 5 years from now, and you can save $3,800 per year, beginning one year from today. you plan to deposit the funds in a mutual fund that you think will return 8.5% per year. under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?

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Answers (1)

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Anton · Answer 1

Using the future value annuity to solve the question we proceed as follows:

FV of annuity=P{[ (1+r) ^n-1]/r}

P=periodic Payment

r=rate per period

n=number of periods

from the question:'

P=$3,800

r=8.5%

n=5 years

hence:

A=3800{[ (1+0.085) ^5-1]/0.085}

A=$22,516.42