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if your bank pays 3.73% interest, how much will you accumulate in the account at the end of 30 years

if your bank pays 3.73% interest, how much will you accumulate in the account at the end of 30 years

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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you have decided to begin saving for retirement. you will deposit $800 in a bank account today. than you will deposit an additional $800 every following year for 29 years (an annuity due). if your bank pays 3.73% interest, how much will you accumulate in the account at the end of 30 years
Expert Solution
Step 1: Introduction

We can determine the accumulated amount using the FV of annuity due formula as below:

F V space equals space P M T space cross times left parenthesis 1 plus r right parenthesis cross times fraction numerator left parenthesis 1 plus r right parenthesis to the power of n minus 1 over denominator r end fraction

In the formula below PMT = Annual annuity
r = annual interest rate 
n = number of payments 

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