You want to go to europe 5 years from now, and you can save $3,800 per year, beginning one year from today. you plan to deposit the funds in a mutual fund that you think will return 8.5% per year. under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?
Accepted Solution
A:
Using the future value annuity to solve the question we proceed as follows: FV of annuity=P{[(1+r)^n-1]/r} P=periodic Payment r=rate per period n=number of periods from the question:' P=$3,800 r=8.5% n=5 years hence: A=3800{[(1+0.085)^5-1]/0.085} A=$22,516.42