On January 1, 2010, I plan a trip four years from now that will cost approx. $15
ID: 2373043 • Letter: O
Question
On January 1, 2010, I plan a trip four years from now that will cost approx. $15,000. I decide to deposit $3,500 in a savings account at the end of each of the next four years, starting on December 31, 2010. The savings account will earn 6% annual interest, which will be added to the savings account at each year-end. (i will have $15,311 after the four deposits and the total amount of interest earned over the four years is $1,311)
How much interest revenue did the fund earn in 2010, 2011, 2012, and 2013?
Explanation / Answer
F = A[(1=i)^n -1] / i
where i = 6% = 0.06
putting in the formula per year we get,
for 2010, n= 1
FV =$ 3710
interest revenue earned by farm = $ 3710 - 3500 = $ 210
in 2011
n= 2
FV = 7642.6
interest revenue earned by farm= $7642.6 - $ (2*3500) = 642.6
in 2012, n=3
FV = $11811.6
interest revenue earned by farm =$11811.6 - (3*3500) = $1311.6
in 2013, n=4
FV = $16229.83
interest revenue earned by farm = $16229.83 - (4*3500) = 2229.83
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