Question

Lifetime savings accounts, known as LSAs, would allow people to invest after-tax money without being taxed on any of the gains. If an engineer invests $10,000 now and $10,000 each year for the next 20 years, how much will be in the account immediately after the last deposit if the account grows by 15% per year?

Answer 1

Final value= $1,178,101.20

Step-by-step explanation:

Giving the following information:

If an engineer invests $10,000 now and $10,000 each year for the next 20 years, how much will be in the account immediately after the last deposit if the account grows by 15% per year?

We need to use the following formula for Final value with annual deposit:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {10000*[(1.15^20)-1]}/0.15= 1,024,435.83

This is the amount accumulated if the deposits were at the end of the year. We need to add an entire interest for one deposit (without the principal)

1,024,435.83+ [(10000*1.15^20 - 10000)]= $1,178,101.20