Question

Suppose that you earned a bachelor's degree and now you're teaching middle school. The school district offers teachers the opportunity to take a year off to earn a master's degree. To achieve this goal, you deposit $1500 at the end of every three months in an annuity that pays 5.5% compounded quarterly. How much will you have saved at the end of 5 years? Find the interest.

Answer 1

Future Value= $34,261.80

Step-by-step explanation:

Giving the following information:

You deposit $1500 at the end of every three months in an annuity that pays 5.5% compounded quarterly.

First, we need to calculate the real interest rate:

Interest rate= 0.055/4= 0.01375

Now, using the following formula, we can calculate the future value:

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

A= quarterly deposit= 1,500

i= 0.01375

n= 4*5= 20

FV= {1,500*[(1.01375^20)-1]} / 0.01375

FV= $34,261.80