Brief Exercise G-5 Your answer is incorrect. Try again. Andrew and Emma Garfield

Question

Brief Exercise G-5 Your answer is incorrect. Try again. Andrew and Emma Garfield invested $7,900 in a savings account paying 4% annual interest when their daughter, Angela, was bom. They also deposited $1,200 on each of her birthdays until she was 17 (including her 17th birthday) Click here to view the factor table Future Value of 1 Click here to view the factor table Future Value of an Annuity of 1 (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) How much was in the savings account on her 17th birthday (after the last deposit)? (Round answer to 2 decimal places, e.g. 25.25. Amount on 17th birthday Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence

A=$7900*(1.04)^17+1200(1.04)^16+1200(1.04)^15+1200(1.04)^14+..............+1200(1.04)^1+1200

=7900(1.04)^17+1200[(1.04)^16+(1.04)^15+(1.04)^14+................+(1.04)^1+1]

=(7900*1.94790)+(1200*23.69751)

which is equal to
=$43825.42(Approx).

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