Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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![### Future Value of Annual Deposits with Compound Interest
You deposit $1,700 at the end of each year into an account paying 8.6 percent interest.
#### a. Future Value Calculation for 16 Years
- **Question:** How much money will you have in the account in 16 years?
- **Input Box:** Placeholder for "Future value of 16 deposits"
#### b. Future Value Calculation for 32 Years
- **Question:** How much will you have if you make deposits for 32 years?
- **Input Box:** Placeholder for "Future value of 32 deposits"
This exercise demonstrates the effect of compound interest over different time periods. To find the future value of these annuities, use the future value of an annuity formula:
\[ \text{FV} = P \times \left(\frac{(1 + r)^n - 1}{r}\right) \]
Where:
- \( P \) is the annual deposit ($1,700),
- \( r \) is the annual interest rate (8.6% or 0.086),
- \( n \) is the number of years (16 or 32).
Enter your calculations in the input boxes provided.](https://content.bartleby.com/qna-images/question/0f20cc49-c768-43e6-a9c4-6f0d40e2f4fd/5b69c4ee-de95-4f9b-b4fa-13d1483272e7/0uhfsl_processed.png)
Transcribed Image Text:### Future Value of Annual Deposits with Compound Interest
You deposit $1,700 at the end of each year into an account paying 8.6 percent interest.
#### a. Future Value Calculation for 16 Years
- **Question:** How much money will you have in the account in 16 years?
- **Input Box:** Placeholder for "Future value of 16 deposits"
#### b. Future Value Calculation for 32 Years
- **Question:** How much will you have if you make deposits for 32 years?
- **Input Box:** Placeholder for "Future value of 32 deposits"
This exercise demonstrates the effect of compound interest over different time periods. To find the future value of these annuities, use the future value of an annuity formula:
\[ \text{FV} = P \times \left(\frac{(1 + r)^n - 1}{r}\right) \]
Where:
- \( P \) is the annual deposit ($1,700),
- \( r \) is the annual interest rate (8.6% or 0.086),
- \( n \) is the number of years (16 or 32).
Enter your calculations in the input boxes provided.
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