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In: Finance

Todd is saving $3,000 annually into an account (payments at theend of each year). He...

Todd is saving $3,000 annually into an account (payments at the end of each year). He plans to increase the annual level of savings by 5 percent each year. He can earn 9 percent annually. How much will he have in the account at the end of twenty years?

Solutions

Expert Solution

Todd is saving annually $3000 into account at the end of each year further the annual savings will increase by 5% each year.

Calculating the Future value in 20 years using Future value of Growing Annuity formula:-

Where, C= Periodic Savings = $3000

r = Periodic Interest rate = 9%

g = Growth rate of savings = 5%

n= no of periods = 20

FV = $221,333.48

So, the amount you will have in the account at the end of twenty years is $221,333.48


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