Question

You plan to make annual deposits of $1,000 into an account at the beginning of each year for the next 12 years. If you can earn 3.1% interest, what will your final balance be by the end of 12 years

Answer 1

Answer:

Final balance = $ 14,272.93

Explanation:

Annual Deposits(PMT) = $1,000

Number of years(N) = 12

Rate of interest (r) = 3.1% = 0.031

Future Value = ?

Computation:

$Future\ Value = PMT[\frac{(1+i)^n-1}{i} ] \\Future\ Value = 1,000[\frac{(1+0.031)^{12}-1}{0.031} ] \\Future\ Value = 1,000[\frac{(1.031)^{12}-1}{0.031} ] \\Future\ Value = 1,000[\frac{1.44246-1}{0.031} ] \\Future\ Value = 1,000[\frac{0.44246}{0.031} ] \\Future\ Value = 1,000[14.2729] \\Future\ Value = 14,272.9252$

Final balance = $ 14,272.93