Question

You deposit $1,100 at the end of each year into an account paying 9.1 percent interest.

(a) How much money will you have in the account in 19 years?
(b) How much will you have if you make deposits for 38 years?

Answer 1

a.

The money that we will have in account is $51156.41

b.

The money that we will have in account is $318808.31

Step-by-step explanation:

a.

The deposits made in the account represent an annuity pattern as the deposits made are of a constant amount, are made after equal interval of time and are for a defined time period. Thus, to calculate the value of money that we will have after 19 years, we will use the formula for the future value of annuity.

The formula for the future value of annuity is attached.

FV = 1100 * [ (1+0.091)^19 - 1 / 0.091 ]

FV = $51156.41178

b.

The same formula for the future value of annuity will be used and we will change n from 19 to 38.

FV = 1100 * [ (1+0.091)^38 - 1 / 0.091 ]

FV = $318808.3149