Question

Suzie has $16,000 in her investment account today. She saves an additional $2,000 a year for the next three years and earns 8% interest compounded annually. How much money will she have in her account three years from now?

Answer 1

$34,021

Step-by-step explanation:

The compound interest formula to find the final value is:

Final value (FV)= Initial value (IV)*[(1+interest(i))]^(number of periods(n))

In this case, the interest provided by the problem is annual so, we don´t have to modify it. Also, we assume that the $2,000 that Suzie saves are deposited at the beginning of the year.

Year 0: $16,000

Year 1: $18,000+($18,000*[1+8%] ^1)= $19,440

Year 2:$21,440+($21,440*[1+8%] ^2)= $25,007.61

Year 3: $27,007+($27007*[1+8%]^3)=$34,021.81