Question

Joe and Susan are both 40 years old and hope to have enough money saved to retire by the time they're 65. They deposit $6,000 each
year into an account that pays 4% interest compounded annually. Use this information to complete the table.
Formula to Use
Account Balance in 20 years
Total Interest Earned
present value of an annuity
future value of a lump sum
future value of an annuity
$99,875
$112,253
$149,875
$249,875
$286,363

Answer 1

Answer:

Formula: Future value of annuity

In 20 years: $249,875

Total Interest: $99,875

Step-by-step explanation:

Use the formula for future value:

FV =

P = $6,000

r = 0.04

n = 1

t = 25

FV =

FV = $249,875

To find the total interest earned, first find the total value of the deposit payments:

$6,000 annual payments for 25 years = 6,000 • 25

= $150,000

(I copied that explanation from somewhere else so its a little messed up. I just couldn't explain it properly. Hope this helps!)