Suppose you invest $5,000 today, and plan on continuing this contribution for the next 15 years....

Suppose you invest $5,000 today, and plan on continuing this contribution for the next 15 years. Afterwards, you are going to stop contributing to the account, but you will not need the money for another 25 years. Assuming that you can earn 8% on this account for the life of the account, how much will you have at the end of this period?

Expert Solution

Value at the end of the period (Future Value)= FV of annuity due for n₁ years*(1+r)^n₂

Where n₁ and n₂ are period of regular savings and period afterwards, respectively (given as 15 and 25 years).

Future value of annuity due= $146,621.42

Value at the end of the period of 40 years= $146,621.42*(1+8%)^25 = $1,004,133.13

Calculations as below:

jeff jeffy answered 2 years ago

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