Question

You make the following deposits for the next five years into an investment account. All deposits are made at the end of the year and the first deposit occurs one year from now. No more deposits are made after year 5. You will leave all the money in the account until year 30. If you earn 10 percent annual return for the first five years and 8 percent annual return for all subsequent years, how much will you have in the account at the end of year 30?

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

First investment:

5 deposits for 5 years at an interest rate of 10%.

Second investment:

Lump-sum for 25 years at an interest rate of 8%.

We weren't provided with the value of the deposits, but I can provide the formulas and an example.

First investment:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit= $2,000

FV= {2,000*[(1.10^5)-1]} / 0.10

FV= $12,210.2

Second investment:

FV= PV*(1+i)^n

FV= 12,210.2*(1.08^25)

FV= $83,621.25