Problem 6-7 Calculating Annuity Values [LO1] If you deposit $5,800 at the end of
ID: 2721557 • Letter: P
Question
Problem 6-7 Calculating Annuity Values [LO1] If you deposit $5,800 at the end of each of the next 15 years into an account paying 11.3 percent interest, how much money will you have in the account in 15 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Future value $ How much will you have if you make deposits for 30 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Future value $
Explanation / Answer
Solution:
Value of money in the account in 15 years = Annual Deposit Amount x (future annuity factor, at 11.3%, for 15)
(future annuity factor, at 11.3%, for 15) = ((1+0.113)15 - 1)/0.113
= (4.98227 - 1) / 0.113
= 3.9822723611 / 0.113
= 35.2413483284
Value of money in the account in 15 years = $5,800 x 35.2413483284 = $204,399.82
part 2:
Future value if make deposits for 30 years = Annual Deposit x (future annuity factor, at 11.3%, for 30)
(future annuity factor, at 11.3%, for 30) = ((1+0.113)30 - 1)/0.113
= (24.8230378798 - 1) / 0.113
= 23.8230378798 / 0.113
= 210.823344069
Future value if make deposits for 30 years = $5,800 x 210.823344069 = $1,222,775.40