Question

You decide to save $1,000 per annum and place the savings in a deposit account at the end of each of the next five years. If you can invest your savings at 12 percent how much will you have accumulated by the end of year five?

Answer 1

To calculate the amount accumulated by the end of year five, we can use the formula for compound interest. Plugging in the given values, the amount accumulated is approximately $1,762.34.

Step-by-step explanation:

To calculate how much you will have accumulated by the end of year five, we can use the formula for compound interest:

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

Where:

• A is the amount accumulated
• P is the principal amount (initial deposit)
• r is the annual interest rate (as a decimal)
• n is the number of times that interest is compounded per year
• t is the number of years

In this case, the principal amount is $1,000, the annual interest rate is 12% (or 0.12 as a decimal), n is 1 (because the interest is compounded annually), and t is 5. Plugging in these values:

A = 1000(1 + 0.12/1)^(1*5)

Simplifying the equation gives:

A = 1000(1.12)^5 ≈ $1,762.34