Question

You are excited to start saving money. You plan to put $20 per week into an investment that you think will pay you 10.4% per year. You plan to make your first deposit today. How much will you have in 10 years? Suppose there are 52 weeks in a year. (Enter only numbers and decimals in your response. Round to 2 decimal places.)

Answer 1

Solution:
	Money in account in 10 years	18299.33
Working Notes:
	As you plan to make your first deposit today, this type of payment is received at of beginning of the period is called annuity due
	Money in account in 10 years will be the Future value of annuity due
	Future value if the payments are an annuity due
	Future value of annuity due= P x ((1+i)^n - 1) (1+i)/I
	P= payments deposited per week =$20
	I=interest rate = Annual interest rate/no of period in a year = 10.4%/52 =0.20%
	n= no. Of period= no of year x No of payment in a year = 10 x 52 =520
	Future value of annuity due at t=10 years
	= P x ((1+i)^n - 1) (1+i)/i
	= 20 x ((1+ 0.20%)^520 - 1) (1+0.20%)/0.20%
	= 20 x 914.9663158
	=18,299.32632
	=18,299.33
	Money in account in 10 years	$18,299.33