Question

In: Finance

Derek will deposit $5,939.00 per year for 18.00 years into an account that earns 14.00%, The...

Derek will deposit $5,939.00 per year for 18.00 years into an account that earns 14.00%, The first deposit is made next year. He has $10,013.00 in his account today. How much will be in the account 36.00 years from today?

Derek will deposit $4,592.00 per year for 13.00 years into an account that earns 7.00%. Assuming the first deposit is made 6.00 years from today, how much will be in the account 35.00 years from today?

Suppose you deposit $2,798.00 into an account today that earns 10.00%. In 5.00 years the account will be worth $________.

Solutions

Expert Solution

a.We use the formula:  
A=P(1+r/100)^n
where
A=future value
P=present value  
r=rate of interest
n=time period.

A=10,013*(1.14)^36+5,939*(1.14)^35+5,939*(1.14)^34+5,939*(1.14)^33+5,939*(1.14)^32+5,939*(1.14)^31+5,939*(1.14)^30+5,939*(1.14)^29+5,939*(1.14)^28+5,939*(1.14)^27+5,939*(1.14)^26+5,939*(1.14)^25+5,939*(1.14)^24+5,939*(1.14)^23+5,939*(1.14)^22+5,939*(1.14)^21+5,939*(1.14)^20+5,939*(1.14)^19+5,939*(1.14)^18

=$5415348.76(Approx)

b.We use the formula:  
A=P(1+r/100)^n
where
A=future value
P=present value  
r=rate of interest
n=time period.

A=4,592*(1.07)^29+4,592*(1.07)^28+4,592*(1.07)^27+4,592*(1.07)^26+4,592*(1.07)^25+4,592*(1.07)^24+4,592*(1.07)^23+4,592*(1.07)^22+4,592*(1.07)^21+4,592*(1.07)^20+4,592*(1.07)^19+4,592*(1.07)^18+4,592*(1.07)^17

=$292145.65(Approx)

c.We use the formula:  
A=P(1+r/100)^n
where
A=future value
P=present value  
r=rate of interest
n=time period.

A=2,798*(1.1)^5

=2,798*1.61051

=$4506.21(Approx)


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