Question

A parent deposits $2500 at the end of each year into an account to help their child pay for college. Assuming that the deposits are placed into an account that earns 4% that is compounded annually, how much money would be in the account just after the 18th deposit?

Answer 1

The amount of money in the account just after the 18th deposit would be approximately $4529.

Step-by-step explanation:

To calculate the amount of money in the account just after the 18th deposit, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:

• A is the future value (the amount of money in the account)
• P is the principal amount (the deposit)
• r is the annual interest rate (4% or 0.04)
• n is the number of times the interest is compounded per year (1 for annually compounded interest)
• t is the number of years

In this case, the principal amount (P) is $2500, the annual interest rate (r) is 4% or 0.04, the number of times the interest is compounded per year (n) is 1, and the number of years (t) is 18. Plugging these values into the formula:

A = 2500(1 + 0.04/1)^(1*18)

Calculating this expression:

A = $2500(1 + 0.04)^18

A = $2500(1.04)^18

A = $2500(1.8116)

A = $4529

Therefore, there would be approximately $4529 in the account just after the 18th deposit.