Question

Steve Jones has decided to start saving for his son's college education by depositing $2,000 at the end of every year for 15 years. A bank has agreed to pay interest at the rate of 4% compounded annually.

Use the appropriate present or future value table:

Fv of $1, Pv of $1, FV of annuity of $1 and PV of Annuity of $1

Required:

How much will Steve have in the bank immediately after his 15th deposit? Round your answer to the nearest dollar. Use the full factor when calculating results.

Answer 1

this can be known using future value of annuity of $1 table or future value of annuity formula:

P*[(1+r)^n-1]/r

here,

P=2000

r=4%=>0.04.

n=15.

2000*[(1.04)^15-1] /0.04

=>2000*20.0235877

=>$40,147.