Question

andrew deposits $258.06 each month into an annuity account for his child's college fund in order to accumulate a future value of $60,000 in 15 years. how much of the $60,000 will andrew ultimately deposit in the account, and how much is interest earned? round your answers to the nearest cent, if necessary.

Answer 1

Andrew will deposit a total of $46,449.80 over 15 years, making monthly deposits of $258.06. The remaining $13,550.20 of the $60,000 accumulated amount is attributed to interest earned on the annuity.

Step-by-step explanation:

Andrew is depositing $258.06 each month into an annuity for his child's college fund, which will accumulate to $60,000 in 15 years.


To determine how much money will be personally deposited and how much will be due to interest, we need to calculate the total amount deposited and then subtract it from the final amount.

First, calculate the total amount Andrew will deposit over 15 years:

• There are 12 months in a year, so over 15 years he will make 15 x 12 = 180 deposits.
  
  
• Each deposit is $258.06, so over the 180 months he will deposit a total of 180 x $258.06.
  
  
• So, Andrew will personally deposit a total of $46,449.80.
  
  

The interest earned on the annuity would be the final amount minus the total deposits:

• Interest earned = $60,000 - $46,449.80 = $13,550.20.