Question

Suppose that you earned a bachelor's degree and now you're teaching highschool. The school district offers teachers the opportunity to take a year off toearn a master's degree. To achieve this goal, you deposit $1000 at the end ofeach year in an annuity that pays 5% compounded annually.How much will you have saved at the end of five years?Find the interest.Click the icon to view some finance formulas.a.b.a. After 5 years, you will have approximately $(Do not round until the final answer. Then round to the nearest dollaras needed.)

Answer 1

Step 1

Given; Suppose that you earned a bachelor's degree and now you're teaching high school. The school district offers teachers the opportunity to take a year off to earn a master's degree. To achieve this goal, you deposit $1000 at the end of each year in an annuity that pays 5% compounded annually. How much will you have saved at the end of five years? Find the interest.

a. After 5 years, you will have approximately $

(Do not round until the final answer. Then round to the nearest dollar

as needed.)

Step 2

The formula for an annuity is;

`FV=P[((1+r)^t-1)/(r)]`

where;

`\begin{gathered} P=1000 \\ r=(5)/(100)=0.05 \\ t=5 \end{gathered}`
`FV=1000[((1+0.05)^5-1)/(0.05)]`
`FV=\text{ \$}5525.63125`

Thus the answer is; After 5 years you will have approximately;

`FV=\text{ \$5526}`

The interest will be;

`\begin{gathered} I=FV-(P(t)) \\ I=5526-(1000(5))=5526-5000=\text{ \$526} \end{gathered}`