Question

Jason and Sarah Allen invested $7,200 in a savings account paying 6% annual interest when their daughter, Angela, was born. They also deposited $1,100 on each of her birthdays until she was 16 (including her 16th birthday). Click here to view the factor table 1. Table 2 Table 3 Table 4 How much was in the savings account on her 16th birthday (after the last deposit)? (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g.5.24571. Round answer to 2 decimal places, e.g. 25.25.)

Answer 1

Answer)

Calculation of amount accumulated on 16^th Birthday of Angela

Amount on Savings account on 16^th Birthday of Angela = (Amount of Initial investment X Future value of $ 1 at 6% for 16 years) + (Amount of annual deposit X Future value of annuity of $ 1 at 6% for 16 years)

                                                                     = ($ 7,200 X 2.54035) + ($ 1,100 X 25.67253)

                                                                     = $ 18,290.52 + $ 28,239.78

                                                                     = $ 46,530.30

Therefore amount accumulated on 16^th Birthday of Angela is $ 46,530.30

Notes:

· Initial deposit of $ 7,200 will be invested for 16 years. Thus future value of $ 1 at 6% for 16 years will be used.

· Maturity Annual deposit of $ 1,100 will be calculated by multiplying the annual deposit will the future value of annuity of $ 1 at 6% for 16 years.