Question

If you deposit $5,000 at the end of each year for the next 20 years into an account paying 10.1% interest, how much money will you have in the account in 20 years? How much will you have if you make deposits for 40 years?

Answer 1

Annual Deposit, (PMT) = $5,000

Interest Rate, (I) = 10.10%

Present Value, (PV) = 0

Time Period, (N) = 20 years

Calculating Future Value,

Using TVM Calculation,

FV = [PV = 0, PMT = 5,000, I = 0.101, N = 20]

FV = $289,647.54

Future Value at the end of Year 20 = $289,647.54

Time Period, (N) = 40 years

Calculating Future Value,

Using TVM Calculation,

FV = [PV = 0, PMT = 5,000, I = 0.101, N = 40]

FV = $2,273,988.16

Future Value at the end of Year 40 = $2,273,988.16