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You currently have $20,000.01 in a bank account that pays you 5 percent interest annually. You plan to deposit $800 (starting 1 year from now) every year for the next 10 years in the same account. How much are you going to have in that account at the end of 10 years?

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facundobuzzetti

Answer:

FV= $44,269.11

Explanation:

First, we need to calculate the future value of the lump-sum deposit of $20,000:

FV= PV*(1 + i)^n

FV= 20,000.01*(1.05^11)

FV= $34,206.8

Now, the future value of the $800 annual deposit:

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

A= annual deposit

FV= {800*[(1.05^10) - 1]} / 0.05

FV= $10,062.31

Finally, the total future value:

FV= $44,269.11

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