Suppose that you earned a bachelor's degree and now you're teaching middle school. The school district offers teachers the opportunity to take a year off to earn a master's degree. To achieve this goal, you deposit $1500 at the end of every three months in an annuity that pays 5.5% compounded quarterly. How much will you have saved at the end of 5 years? Find the interest.

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Business

Judah Johns

30 August, 19:19

Suppose that you earned a bachelor's degree and now you're teaching middle school. The school district offers teachers the opportunity to take a year off to earn a master's degree. To achieve this goal, you deposit $1500 at the end of every three months in an annuity that pays 5.5% compounded quarterly. How much will you have saved at the end of 5 years? Find the interest.

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Peyton Hart · Answer 1

Future Value = $34,261.80

Explanation:

Giving the following information:

You deposit $1500 at the end of every three months in an annuity that pays 5.5% compounded quarterly.

First, we need to calculate the real interest rate:

Interest rate = 0.055/4 = 0.01375

Now, using the following formula, we can calculate the future value:

FV = {A*[ (1+i) ^n-1]}/i

A = quarterly deposit = 1,500

i = 0.01375

n = 4*5 = 20

FV = {1,500*[ (1.01375^20) - 1]} / 0.01375

FV = $34,261.80