Jenny Carson invested $18,000 at 8% annual interest and left the money invested

Question

Jenny Carson invested $18,000 at 8% annual interest and left the money invested without withdrawing any of the interest for 15 years. At the end of the 15 years, Jenny decided to withdraw the accumulated amount of money. Jenny has found the following values in various tables related to the time value of money.

Present value of 1 for 15 periods at 8% 0.31524

Future value of 1 for 15 periods at 8% 3.17217

Present value of an annuity of 1 for 15 periods at 8% 8.55948

Future value of an annuity of 1 for 15 periods at 8% 27.15211

To the closest dollar, which amount would she withdraw, assuming that the investment earns interest compounded annually?

Explanation / Answer

Hi,

Please find the answer as follows:

Methodology 1: With the use of Formula

Future Value = P*(1+r)^n

P = 18000

r = 8%

n = 15

Future Value (Amount that will be withdrawn) = 18000*(1+.08)^15 = 57099

Methodology 2: With the use of Table

Future Value (Amount that will be withdrawn) = 18000*3.17217= 57099

Answer is 57099.

Thanks.

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