Gary and Debra Garfield invested $7,400 in a savings account paying 8% annual interest when their...

Gary and Debra Garfield invested $7,400 in a savings account paying 8% annual interest when their daughter, Angela, was born. They also deposited $1,000 on each of her birthdays until she was 18 (including her 18th birthday).

Expert Solution

Step 1 :	Future value of $7400
	FV= PV*(1+r)^n

	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= periods in number

	= $7400*( 1+0.08)^18

	=7400*3.99602

	= $29570.54

Step 2 :	Future value of annuity

	Future Value of an Ordinary Annuity
	= C*[(1+i)^n-1]/i

	Where,
	C= Cash Flow per period
	i = interest rate per period
	n=number of period

	= $1000[ (1+0.08)^18 -1] /0.08

	= $1000[ (1.08)^18 -1] /0.08

	= $1000[ (3.996 -1] /0.08]

	= $37,450.24


Step 3 :	Total Value

	=$29570.54+37450.24
	=$67020.78

ekkarill92 answered 10 months ago

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