Kate deposits $50,000 at the end of each year for exactly 20 years, in an account paying annual interest of 5%. The first payment will occur in exactly 1 year. Draw timelines.
(i) How much will she have in deposit after 20 years?
(ii) If Kate instead deposited $5,000 at the end of each month, how much will she have on deposit after 20 years? The first payment will occur in exactly 1 month.
i) We are given the following information:
PMT | $ 50,000.00 |
r | 5.00% |
n | 20 |
We need to solve the following equation to arrive at the required FV
So the Account will have $1,653,297.71 accumulated in it at the end of year 20
The 50 represents 50000, and the shorthand is used for visibility in the image
ii)We are given the following information:
PMT | $ 5,000.00 |
r | 5.00% |
n | 20 |
Frequency | 12 |
We need to solve the following equation to arrive at the required FV:
So the account will have $2,055,168.34 accumulated in it
Kate deposits $50,000 at the end of each year for exactly 20 years, in an account...
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