Question

If you deposit ​$2,900 today into an account earning an annual rate of return of 11 percent, what would your account be worth in 35 years​ (assuming no further​ deposits)? In 40 ​years?

a.  If you deposit ​$2,900 today into an account earning an annual rate of return of 11 ​percent, what would your account be worth in 35 ​years? ​$ ___​(Round to the nearest​ cent.)

Answer 1

1.Information provided:

Present value= $2,900

Time= 35 years

Interest rate= 11%

The question is concerning finding the future value of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This can be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode.  Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^ndBGN 2^ndSET on the Texas BA II Plus calculator.

Enter the below in a financial calculator to compute the future value of ordinary annuity:

PMT= -2,900

N= 35

I/Y= 11

Press the CPT key and FV to compute the future value of ordinary annuity.

The value obtained is 111,867.07.

Therefore, the account will be worth $111,867.07 in 35 years.

2.Information provided:

Present value= $2,900

Time= 40 years

Interest rate= 11%

The question is concerning finding the future value of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This can be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode.  Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^ndBGN 2^ndSET on the Texas BA II Plus calculator.

Enter the below in a financial calculator to compute the future value of ordinary annuity:

PMT= -2,900

N= 40

I/Y= 11

Press the CPT key and FV to compute the future value of ordinary annuity.

The value obtained is 188,502.52.

Therefore, the account will be worth $188,502.52 in 40 years.

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