Question

You currently have $20,000.01 in a bank account that pays you 5 percent interest annually. You plan to deposit $800 (starting 1 year from now) every year for the next 10 years in the same account. How much are you going to have in that account at the end of 10 years?

Answer 1

FV= $44,269.11

Step-by-step explanation:

First, we need to calculate the future value of the lump-sum deposit of $20,000:

FV= PV*(1 + i)^n

FV= 20,000.01*(1.05^11)

FV= $34,206.8

Now, the future value of the $800 annual deposit:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {800*[(1.05^10) - 1]} / 0.05

FV= $10,062.31

Finally, the total future value:

FV= $44,269.11