Question

Your parents make 20 equal annual deposits of $2,000 each into a bank account earning 3% interest per year. The first deposit will be made one year from today. How much money can be withdrawn from this account immediately after the 20th deposit?

a. $50,000
b. $40,000
c. $39,000
d. $38,000

Answer 1

To find the amount that can be withdrawn from the bank account after 20 deposits, we need to calculate the future value of the deposits.

Step-by-step explanation:

To find the amount that can be withdrawn from the bank account after 20 deposits, we need to calculate the future value of the deposits. We can use the formula for compound interest to calculate the future value:

Future Value = Principal * (1 + Interest Rate)^n

In this case, the principal is $2,000, the interest rate is 3%, and the number of periods (n) is 20. Plugging in these values, we get:

Future Value = $2,000 * (1 + 0.03)^20 = $2,000 * 1.03^20 = $2,000 * 1.8061 ≈ $3,612.20

Therefore, the correct answer is d. $38,000.