16. If you deposit $1000 at the end of each of the next 10 years, how...

16. If you deposit $1000 at the end of each of the next 10 years, how much will you have in 20 years if you earn 10% APR compounded annually?A. $41,338B. $40,187C. $42,492D. $43,937E. $42,531

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Solutions

Expert Solution

FV = Deposit * FVF(r%, n)

where r is int rate per anum and n is gap [ 20- Yr of deposit] between Deposit ( Yr of deposit) and maturity( 20 Years).

Thus OPtion A correct.

COmput FV of Annuity after 10 Years:

FV of Annuity = Deposit * [ (1+r)^n - 1 ] / r

= 1000 [ ( 1 + 0.10 )^10 - 1 ] /0.10

= 1000 [ ( 1.10)^ 10 - 1 ] / 0.10

= 1000 [ (2.5937 - 1 ] / 0.10

= 1000 * 1.5937 / 0.10

= 15,937

FV of This 15937 after 10 Years [ Because 15937 is value after 10 Years and there is balance of 10 Years ]

= 15937 * (1+r)^n

= 15937 (1+0.10)^10

= 15937 (2.5937)

= 41338

jeff jeffy answered 1 month ago

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