Question

In: Economics

You deposit today $3100 dollars in an account that pays 4.8 percent per year. For the...

You deposit today $3100 dollars in an account that pays 4.8 percent per year. For the next few years you will keep making deposits 7.1 percent larger than the previous one. What will be the balance on the account after 15 deposits. I feel like I am missing the annuity to solve this problem, but I could be wrong.

Solutions

Expert Solution

Today I deposit $3,100. Which earns return annually at 4.8%. Thus in the first year the return is $149. 3100*4.8% 3100+149 = 3249.

Every year I go on depositing and I increase the deposit by 7.1%. Thus 3100*(1.071) = 3320. After the 2nd deposit the balance will be 3249 which is the amount deposited plus the interest, and in that year I deposit 3320. Thus the balance will be previous years interest earned income plus this years deposit. Which is $6569 (3320+3249). The interest on that will 6569(1.048) = $6,884

Deposit Total balance (Deposit plus previous years return) Return
Initial deposit 3100 3249
3320 6569 6884
3556 10440 10941
3808 14749 15457
4079 19536 20474
4368 24842 26035
4678 30713 32187
5011 37198 38983
5366 44350 46478
5747 52226 54733
6155 60888 63811
6592 70403 73782
7060 80843 84723
7562 92285 96715
8099 104813 109844

Thus the balance would be $109844 including return.

Not including return it would be $104813


Related Solutions

13.Suppose you deposit $5,000 into your bank account today. If the bank pays 3.75percent per year,...
13.Suppose you deposit $5,000 into your bank account today. If the bank pays 3.75percent per year, then which of the following statements is (are) correct? (x)$7,825.14is in your account after 12years if interest is compounded quarterly but only $7,777.27if the interest is compounded annually.(y)You will earn an additional $31.69of interest in your account after 12years if interest is compounded semi-annually instead of annually, but $27.10less interest if interest is compounded semi-annually instead of monthly.(z)Although compounding daily instead of weekly will...
Assume that you deposit $ 1,704 into an account that pays 7 percent per annum. How...
Assume that you deposit $ 1,704 into an account that pays 7 percent per annum. How much money will be in the account 25 years from today? (Round your answer to 2 decimal places; record your answer without commas and without a dollar sign).
Which do you? prefer: a bank account that pays 4.8 % per year? (EAR) for three...
Which do you? prefer: a bank account that pays 4.8 % per year? (EAR) for three years or a. An account that pays 2.6 % every six months for three? years? b. An account that pays 6.8 % every 18 months for three? years? c. An account that pays 0.58 % per month for three? years?
Which do you​ prefer: a bank account that pays 4.8% per year​ (EAR) for three years...
Which do you​ prefer: a bank account that pays 4.8% per year​ (EAR) for three years or a. An account that pays 2.6% every six months for three​ years?                    b. An account that pays 7.4% every 18 months for three​ years?                    c. An account that pays 0.41% per month for three​ years? ​(Note: Compare your current bank EAR with each of the three alternative accounts. Be careful not to round any intermediate steps less than six decimal​ places.)   
You deposit $1,500 into an account that pays 4% per year. Your plan is to withdraw...
You deposit $1,500 into an account that pays 4% per year. Your plan is to withdraw this amount at the end of 5 years to use for a down payment on a new car. How much will you be able to withdraw at the end of 5 years? Do not round intermediate calculations. Round your answer to the nearest cent.
You plan to make a deposit today to an account that pays 6% compounded annually that...
You plan to make a deposit today to an account that pays 6% compounded annually that will found the following withdrawals with nothing left in the account after the withdrawals, starting at the end of year 4 you plan to make 5 annual withdrawals (withdraw in year 4,5,6,7,8) that will increase by 2% over the previous year's withdrawals. The amount for withdrawals in year 4 will be $2000, what amount do you need to deposit today?
1. Derek will deposit $1,692.00 per year into an account starting today and ending in year...
1. Derek will deposit $1,692.00 per year into an account starting today and ending in year 5.00. The account that earns 14.00%. How much will be in the account 5.0 years from today? 2. Derek has the opportunity to buy a money machine today. The money machine will pay Derek $10,304.00 exactly 15.00 years from today. Assuming that Derek believes the appropriate discount rate is 14.00%, how much is he willing to pay for this money machine?
Derek will deposit $2,706.00 per year into an account starting today and ending in year 25.00....
Derek will deposit $2,706.00 per year into an account starting today and ending in year 25.00. The account that earns 10.00%. How much will be in the account 25.0 years from today?
Derek will deposit $2,703.00 per year into an account starting today and ending in year 10.00....
Derek will deposit $2,703.00 per year into an account starting today and ending in year 10.00. The account that earns 5.00%. How much will be in the account 10.0 years from today? the answer is 38,400.95 but i dont know how to solve it, im still confuse on this, can you please help me
If you deposit money today in an account that pays 15.0% annual interest, how long will...
If you deposit money today in an account that pays 15.0% annual interest, how long will it take to double your money?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT