Megan invests $1,200 each year in an ira for 12 years in an account that earned 5% compounded annually. at the end if 12 years she stopped making payments to the account but continued to invest her acchnukated amount at 5% compounded annually for the next 11 years

Question

Mathematics

Kaitlyn

22 February, 04:06

Megan invests $1,200 each year in an ira for 12 years in an account that earned 5% compounded annually. at the end if 12 years she stopped making payments to the account but continued to invest her acchnukated amount at 5% compounded annually for the next 11 years

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Orlando · Answer 1

Part A (annual payments)

Future value (after 12 years)

FV = A (1+R+R^2 + ... R^ (n-1))

=AR^n / (R-1)

=AR^n/i

A=annual payment

i=annual interest rate, compounded yearly

R=1+i

(Here A=$1200, i=0.05, R=1.05, n=12)

Part B (initial deposit, compound interest)

Future value (after 11 years) = FV * R^n

Here

FV=result from part A R=1.05

n=11 (years)