Question

Your grandmother has invested $9000 in a mutual fund each year on your birthday (she made her first payment when you turned 1 year old). The mutual fund has grown at an annual interest rate of 6.8%. How much is your account worth on the day of your 21st birthday immediately after your grandmother’s deposit?

Answer 1

394,549

Step-by-step explanation:

this problem can be solved applying the concept of annuity, keep in mind that an annuity is a formula which allows you to calculate the future value of future payments affected by an interest rate.by definition the future value of an annuity is given by:

`s_(n) =P*((1+i)^(n)-1 )/(i)`

where
`s_(n)` is the future value of the annuity,
`i` is the interest rate for every period payment, n is the number of payments, and P is the regular amount paid. so applying to this particular problem, we have:

`s_(21) =9,000*((1+0.068)^(21)-1 )/(0.068)`

`s_(21) =394,549`