Question

PLEASE ANSWER IN EXCEL!

The Ajax Co. just decided to save $15,000 a year for the next five years as a safety net for recessionary periods. The money will be set aside in a separate savings account which pays 3.25% interest. It deposits the first $15,000 today. How much would the company end up with, in this saving account, at the end of the 5 year? The Ajax Co. just decided to save $15000 a year for the next five years as a safety net for recessionary periods. The money will be set aside in a separate savings account which pays 3.25% interest. It deposits the first $15000 today. How much would the company end up with, in this saving account, at the end of the 5 year?

Answer 1

Amount after 5 Years = FV of Annuity Due.

FV of Annuity Due:

Annuity is series of cash flows that are deposited at regular intervals for specific period of time. Here deposits are made at the begining of the period. FV of annuity is future value of cash flows deposited at regular intervals grown at specified int rate or Growth rate to future date.

FV of Annuity DUe = ( 1 + r ) * FV of Annuity

FV of Annuity = (1+r) * CF [ (1+r)^n - 1 ] / r
r - Int rate per period
n - No. of periods

Particulars	Amount
Cash Flow	$    15,000.00
Int Rate	3.250%
Periods	5

FV of Annuity Due = ( 1+ r) [ Cash Flow * [ [ ( 1 + r )^n ] - 1 ] /r ]
= ( 1 + 0.0325 ) * [15000 * [ [(1+0.0325)^5] - 1 ] / 0.0325 ]
= ( 1.0325 ) * [15000 * [ [( 1.0325 ) ^ 5 ] - 1 ] / 0.0325 ]
= ( 1.0325 ) * [15000 * [ [ 1.1734 ] - 1 ] / 0.0325 ]
= ( 1.0325 ) * [ $ 80036.03 ]
= $ 82637.2

Amount in savings Account after 5 Years is $ 82637.2