Question

Derek will deposit $8,984.00 per year for 10.00 years into an account that earns 8.00%, The first deposit is made next year. How much will be in the account 43.00 years from today?

Answer format: Currency: Round to: 2 decimal places.

Answer 1

Step-1, Calculation of Future Value of an annuity after 10 Years

Annuity (P) = $8,984 per year

Number of period (n) = 10 Year

Interest rate (r) = 8.00%

Future Value of an Ordinary annuity = P x [{(1 + r)^n - 1} / r]

Future Value of an Ordinary annuity = $8,984 x [{(1 + 0.08)^10 - 1} / 0.08]

Future Value of an Ordinary annuity = $8,984 x [{2.158924997 - 1} / 0.08]

Future Value of an Ordinary annuity = $8,984 x [1.158924997 / 0.08]

Future Value of an Ordinary annuity = $8,984 x 14.48656247

Future Value of an Ordinary annuity = $130,147.28

Step-2, Calculation of Future Value after 43rd Year

P = $130,147.28

Number of period (n) = 33 Year [43 Years - 10 Years]

Interest rate (r) = 8.00%

Future Value = P x (1 + r)^n

Future Value = $130,147.28 x (1 + 0.08)^33

Future Value = $130,147.28 x 12.67604964

Future Value = $1,649,753.35

Therefore, the amount in the account 43.00 years from today will be $1,649,753.35