12-2 John Whitten is one of the physicians on staff at Metropolis Health System.

Question

12-2 John Whitten is one of the physicians on staff at Metropolis Health System. His practice is six years old. he has set up an office savings account to accumalate the funds to replace equipment in his practice. today John is trying to figure what his equipment fund will amount to in four more years.

the equipment fund savings account presently has a balance of $63,500 and any interest earnrd over the next four years will be left in the account. John assumes the annual interest rate will be 5%. How much money will be in the account at the end of four more years/

1. compute how much money will be in the account at the end of four more years. 9use the future or compound interest table)

Explanation / Answer

The future value is P*(1+r/n)^(nt) where r is the interest rate, n is number of compounding periods and t is the number of years. So the balance at the end of 4 years would be 63500*(1+5%)^4 = $77,184.647.

If you want to use the tables: the table would be as below:

So, at the end of 4 years, the money becomes 63,500*1.2155063 = $77,184.647

1.05 1 1.05 1.05 2 1.1025 1.05 3 1.157625 1.05 4 1.2155063 1.05 5 1.2762816 1.05 6 1.3400956 1.05 7 1.4071004

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