Answered

At Westonci.ca, we connect you with experts who provide detailed answers to your most pressing questions. Start exploring now! Discover detailed answers to your questions from a wide network of experts on our comprehensive Q&A platform. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.

You are saving to buy a speed boat. Starting today, you will put $1,000 into an investment account. Each month thereafter, your contribution will be .1% (.001) higher than the month before, so that your contribution next month will be .1% higher than today, and so forth and so on. The investment account has a periodic monthly interest rate of .4% (.004). Ignore taxes. You will make contributions until 5 years from today.
At the end of five years, when you put in your last ­contribution, how much will you have saved?

Sagot :

Answer:

You will have saved $69,612 after five years.

Step-by-step explanation:

This can be calculated using the for formula for calculating the future value of a growing annuity as follows:

FV = C * (((1 + r)^n - (1 + g)^n) / (r - g)) ……………………………………… (1)

Where;

FW = future value or amount you will have saved after five years = ?

C = first deposit = $1,000

r = periodic monthly interest rate of = 0.4%, or 0.004

g = growth rate of contribution = 0.1%, or 0.001

n = number of months = 5 years * 12 = 60

Substituting all the values into equation (1), we have:

FV = $1,000 * (((1 + 0.004)^60 - (1 + 0.001)^60) / (0.004 - 0.001))

FV = $1,000 * 69.612001854052

FV = $69,612.00

Therefore, you will have saved $69,612 after five years.

We appreciate your time on our site. Don't hesitate to return whenever you have more questions or need further clarification. We appreciate your time. Please revisit us for more reliable answers to any questions you may have. Thank you for trusting Westonci.ca. Don't forget to revisit us for more accurate and insightful answers.