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Consider the following four investments. a)You invest $3,000 annually in a mutual fund that earns 10 percent annually, and you reinvest all distributions. How much will you have in the account at the end
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22 votes
22 votes
Consider the following four investments. a)You invest $3,000 annually in a mutual fund that earns 10 percent annually, and you reinvest all distributions. How much will you have in the account at the end of 20 years

User Thewisegod
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1 Answer

23 votes
23 votes

Answer: $171,825

Step-by-step explanation:

As you invest the same base amount as well as every distribution you receive, this can be said to be an annuity due to the amount being the same and the interest being compounded.

The value at the end of 20 years would be the future value of this annuity and is calculable as follows:

= Annuity * ( ( 1 + rate) ^ number of period - 1) / rate

= 3,000 * ( ( 1 + 10%)²⁰ - 1) / 10%

= $171,824.998

= $171,825

User Ivan Abramov
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