Your first child was just born and you want to set up an annuity due savings plan to finance her college education. Your financial institution pays 3.15% interest. If you deposit $1,000 today, and make additional $1,000 deposits every year for the next 17 years, how much will accumulate in the account in 18 years? $23,733.86 $25,485.19 $24,611.49 $24,481.48
Your first child was just born and you want to set up an annuity due savings plan to finance her college education. Your financial institution pays 3.15% interest. If you deposit $1,000 today, and make additional $1,000 deposits every year for the next 17 years, how much will accumulate in the account in 18 years? $23,733.86 $25,485.19 $24,611.49 $24,481.48
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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Question
Transcribed Image Text:**Problem Statement:**
Your first child was just born and you want to set up an annuity due savings plan to finance her college education. Your financial institution pays 3.15% interest. If you deposit $1,000 today, and make additional $1,000 deposits every year for the next 17 years, how much will accumulate in the account in 18 years?
**Options:**
- $23,733.86
- $25,485.19
- $24,611.49
- $24,481.48
**Analysis:**
This problem involves calculating the future value of an annuity due, where each deposit is made at the beginning of the period. The interest rate and the number of periods must be considered to find the correct accumulated value from the given options.
Expert Solution
Step 1: Define of Future Value
Future Value is the amount which is received by the investor at the end of some specified period of time. It includes the interest earned and deposit amount which is earned by the investor on his investment.
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