Question

On January 1, you plan to take a trip around the world upon graduation four years from now. Your grandmother wants to deposit sufficient funds for this trip in an investment account for you. On the basis of a budget, you estimate that the trip currently would cost $17,000. Being the generous and sweet lady she is, your grandmother decided to deposit $4,000 in the fund at the end of each of the next four years, starting on December 31, 2015. The account will earn 8 percent annual interest, which will be added to the account at each year-end. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1.  
How much money will you have for the trip at the end of year 4 (i.e., after four deposits)? (Round your final answer to the nearest whole dollar amount.)

2.  
What is the total amount of interest earned over the four years? (Round your final answer to the nearest whole dollar amount.)

3.  
How much interest revenue did the fund earn in 2015, 2016, 2017, and 2018? (Round your final answers to the nearest whole dollar amount.)

Answer 1

(1) At the end of 4 years, the fund will carry an amount of 5442 dollars.This is because in year 2015,the deposited 4000 carried an interest rate of 320.This is added to the principal amount to get 4320 which becomes the next years deposit.Similarly each years compounded value will finally round off to 5441.94 or 5442.

(2) The total amount of interest earned in all these years is equal to 1441.84 or 1442.

(3)  

2015	2016	2017	2018
4000	4320	4665.6	5038.84
320	345.6	373.24	403
4320	4665.6	5038.84	5441.94

The principal in each year is given in first row that is ,4000,4320,4665.6,5038.84.The interest rate in each year is 320,346,373,403. respectively.