Question

Suppose Chris starts saving in 3 years from today. He will save $20,000 each year for 6 years (until the end of year 8). Then he leaves that money in the same account until the end of year 10. How much will he have saved at the end of year 10 if he earns 4.3% interest.

Answer 1

FV= $145,406.11

Step-by-step explanation:

Giving the following information:

Annual deposit= $20,000

Interest rate= 4.3%

First, we need to calculate the value of the investment at the end of year 8. We will use the following formula:

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

A= annual deposit

FV= {20,000*[(1.043^6) - 1]} / 0.043

FV= $133,663.87

Now, the value at the end of the 10th year:

FV= PV*(1+i)^n

FV= 133,663.87*(1.043^2)

FV= $145,406.11