You plan to make annual deposits of $130 for the next 6 years, followed by annual...

You plan to make annual deposits of $130 for the next 6 years, followed by annual deposits of $1,112 for the following 6 years. The deposits earn interest of 4.2%. What will the account balance be by the end of year 27? Round to the nearest cent.

Solutions

Expert Solution

First, let's find the future value of the annual deposits of $130 for the next year

This gives the future value as of year 6

We will move this forward to year 27

FV27 = FV6 * (1 + r)^n

n = 27 - 6 = 21

FV27 = 866.6333157857 * (1 + 0.042)^21

FV27 = $2,056.1627104548

Now, we will find the futur value of the annual deposits of $1,112

We will move this forward to year 27

FV27 = FV12 * (1 + r)^n

n = 27 - 12 = 15

FV27 = 7,413.0480550286 * (1 + 0.042)^15

FV27 = $13,740.8183974798

The account balance by the end of year 27 = 2,056.1627104548 + 13,740.8183974798

The account balance by the end of year 27 = 15,796.9811079346

The account balance by the end of year 27 = $15,796.98

jeff jeffy answered 2 years ago

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