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navik [9.2K]
3 years ago
7

Andrew and Emma Garfield invested $7,900 in a savings account paying 4% annual interest when their daughter, Angela, was born. T

hey also deposited $1,200 on each of her birthdays until she was 17 (including her 17th birthday).
How much was in the savings account on her 18th birthday (after the last deposit)? (Round answer to 2 decimal places, e.g. 25.25.)
Business
2 answers:
il63 [147K]3 years ago
5 0

Answer:

$44,440.96

Explanation:

We must find the future value of the initial $7,900 deposit and the annuity (17 deposits of $1,200 each)

  • future value of the initial deposit = present value x (1 + interest rate)ⁿ = $7,900 x 1.04¹⁸ = $16,003.95
  • future value of the annuity = Payment x ([1 + interest rate]ⁿ - 1) / interest rate = $1,200 x (1.04¹⁷ - 1) / 0.04 = $28,437.01

total amount on Angela's savings account = $16,003.95 + $28,437.01 = $44,440.96

galina1969 [7]3 years ago
4 0

Answer:

45,578.45

Explanation:

PV = $ -7,900 (The iniiial investment made by Andrew and Emma at year 0)

i/r = 4% (annual interest)

PMT = $ -1,200 (Annual deposit on Angela's birthday)

n = 17

FV (Value of the savings account at Angela's 17th birthday)

Using financial calculator, we have FV = $43,825

Value of the savings at Angela's 18th birthday = $43,825 x 1.04 = 45,578.45

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