Question

Barry and Iris Allen want to save money for their children. They deposit $2500 each year

for 20 years in a savings account paying 5% compounded annually.

a. How much would be in the account after 20 years?

b. How much of the final balance did they actually contribute?

Answer 1

A). The amount in 20 years

=$ 13574.45

B).36.83%

Explanation:

A)

The both deposit the sum of $2500 each year that is the sum total of $5000.

Rate = 5 %

Years= 20

Then compounded annually so number of times = 20

A = P(1+r/n)^(nt)

= 5000(1+ (0.05/20))^ (20*20)

= 5000(1+0.0025)^(400)

= 5000(1.0025)^(400)

= 5000(2.71489)

= 13574.45

The amount in 20 years =$ 13574.45

B) let's calculate the percentage of the actual balance they contributed.

= 5000/13574.45

= 0.3683333

= 36.83%