Anthony deposits $650 into an annuity at the end of every quarter for 5 years. The fund holds international stocks, and it yields about 12% compounded quarterly. Find the interest earned after 5 years.

Question

Mathematics

Robert Sanford

16 August, 11:45

Anthony deposits $650 into an annuity at the end of every quarter for 5 years. The fund holds international stocks, and it yields about 12% compounded quarterly. Find the interest earned after 5 years.

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Answers (1)

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Justice Reynolds · Answer 1

The future value annuity is given by:

FV=P[ (1+r) ^n-1]/r

where:

P=principle=$650

r=rate=0.12/4=0.03

t = time=5*4=20

Hence our future value annuity will be:

FV=650[ (1+0.03) ^20-1]/0.03

FV=650*0.80611/0.03

FV=650*26.870375

FV=$17,465.75

The answer is $17,465.75