Brief Exercise G-5 Andrew and Emma Garfield invested $7,700 in a savings account

Question

Brief Exercise G-5 Andrew and Emma Garfield invested $7,700 in a savings account paying 8% annual interest when their daughter, Angela, was born. They also deposited $1,400 on each of her birthdays until she was 15 (including her 15th birthday) Click here to view the factor table Future Value 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 15th birthday (after the last deposit)? (Round answer to 2 decimal places, e.g. 25.25.) Amount on 15th 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=7700*(1.08)^15+1400(1.08)^14+1400(1.08)^13+...........+1400(1.08)^1+1400

=7700*1.08^15+1400[(1.08)^14+(1.08)^13+...........+(1.08)^1+1]

=(7700*3.17217)+(1400*27.15211)

=$62438.66(Approx).

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