Answer:
$108,583.98
Explanation:
Given:
Initial deposit = $3,500
Rate = 9.652%
You also plan on depositing $4,500 at the end of years 5 through 10.
Required:
What will be the value of the account at the end of 20 years, assuming you earn your expected rate of return?
First calculate the future value of first installment, $3500 at end of year 20, since the amount was not deposited at once:
[tex]3500 * PVIF(0.9652, 20) = 22,100.35[/tex]
Calculate the future value of annual deposits at end of year 10:
Given, N = 6 years )i.e from 5 to 10 years)
I/Y = 9.652%
PV = 0
PMT = $4,500
FV(9.652%, 6, 4500, 0)
FV = $34,416.63
Calculate the future value of annual deposits at end of year 20:
Given, N = 10 Years (from end of year 10, to year 20)
PV = 34,416.43
I/Y = 9.652%
FV = 34,416.43 * PVIF(0.9652, 10)
FV = $86,483.63
The total future value at end of year 20:
Future value of initial deposit + Future Value of annual deposits
= $22,100.35 + $86,483.63
= $108,583.98
The value of the account at the end of 20 years = $108,583.98
