Question

Anthony deposits $650 into an annuity at the end of every quarter for 5 years. The fund holds international stocks, and it yields about 12% compounded quarterly. Find the interest earned after 5 years.

Answer 1

The future value annuity is given by:
FV=P[(1+r)^n-1]/r
where:
P=principle=$650
r=rate=0.12/4=0.03
t= time=5×4=20
Hence our future value annuity will be:
FV=650[(1+0.03)^20-1]/0.03
FV=650×0.80611/0.03
FV=650×26.870375
FV=$17,465.75
The answer is $17,465.75