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In one year, you will make an initial deposit in the amount of$5,000 in a...

In one year, you will make an initial deposit in the amount of $5,000 in a new savings account. You plan to make additional deposits in the same amount of $5,000 for 11 years after the initial deposit. There will only be these 12 deposits and no withdrawals made to your account. Assume the interest rate you will earn is 4% per year. How much will your account be worth in 12 years?

Solutions

Expert Solution

The amount is computed as follows:

Future value = Annual deposits x [ [ (1 + r)n – 1 ] / r ]

= $ 5,000 x [ [ (1 + 0.04)12 - 1 ] / 0.04 ]

= $ 5,000 x 15.02580546

= $ 75,129.03 Approximately

jeff jeffy answered 2 years ago
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