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15 May, 13:01

Lifetime savings accounts, known as LSAs, would allow people to invest after-tax money without being taxed on any of the gains. If an engineer invests $10,000 now and $10,000 each year for the next 20 years, how much will be in the account immediately after the last deposit if the account grows by 15% per year?

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  1. 15 May, 15:45
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    Final value = $1,178,101.20

    Explanation:

    Giving the following information:

    If an engineer invests $10,000 now and $10,000 each year for the next 20 years, how much will be in the account immediately after the last deposit if the account grows by 15% per year?

    We need to use the following formula for Final value with annual deposit:

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

    A = annual deposit

    FV = {10000*[ (1.15^20) - 1]}/0.15 = 1,024,435.83

    This is the amount accumulated if the deposits were at the end of the year. We need to add an entire interest for one deposit (without the principal)

    1,024,435.83 + [ (10000*1.15^20 - 10000) ] = $1,178,101.20
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