Answer:
If the deposits are made at the beginning of the year, the future value will increase by $18,821.1.-
Explanation:
Giving the following information:
Annual deposit= $2,400
Interest rate= 5.6%
Number of periods= 40
<u>First, we will calculate the future value when the deposits are made at the end:</u>
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {2,400*[(1.056^40) - 1]} / 0.056
FV= $336,091.14
<u>Now, if the deposits are made at the beginning:</u>
FV= {A*[(1+i)^n-1]}/i + {[A*(1+i)^n]-A}
FV= 336,091.14 + [(2,400*1.056^40) - 2,400]
FV= 336,091.14 + 18,821.10
FV= $354,912.24
Difference= 354,912.24 - 336,091.14
Difference= $18,821.1
If the deposits are made at the beginning of the year, the future value will increase by $18,821.1.-
