Question

Using formulas

Dean invests 45 dollars at the end of this year into the stock market, which is expected to earn 10% per year. Dean expects to get a $2 raise every year at work for the next 26 years. Rather than spend his additional income, Dean plans to increase the amount he invests in the stock market by $2 per year. Assume Dean retires after 26 years. How much money are Dean's investments worth at the end of 26 years? For the sake of simplicity, assume Dean makes his last investment at the end of year 26, right before he retires. (note: round your answer to the nearest cent and do not include spaces, currency signs, or commas) DQuestion 6 1 pts

Answer 1

If Dean invests $25 per year starting fro the end of this year then he gets 25 full years till 26 years from now

He plans to add $ 2 in each investment per year hence we need to calculate future value of these investment over the period of 26 years

Future Worth=Present Worth*(1.1)^26

Present Worth=25/(1.1)+27(1.1)^2+29/(1.1)^3+...+75/(1.1)^26

Because at the 2nd year investment is 25+2(2-1)=27
Investment at the 26 th year=25+2(26-1)=75

PW =368.61

Now to get the Future worth that is the investment after 26 years is PW(1.1)^26=368.61*1.1^26=$4393.16

Hence at the end of 26 years Dean will have 4393 in his account