Candice Medavoy will invest 6250 a year for 22 years in a fu

Candice Medavoy will invest $6,250 a year for 22 years in a fund that will earn 15% annual interest. Click here to view factor tables If the first payment into the fund occurs today, what amount will be in the fund in 22 years? If the first payment occurs at year-end, what amount will be in the fund in 22 years?

Solution

given information

PMT-$6250

time -22 years

rate-15 %

For payment done today, the value of 15% and 22 years in factor in future value annuity due table is 158.2764

Thus value after 22 years - 158.2764*6250= $989,227.40

For payment done after year end, the value of 15% and 22 years in factor in future value ordinary annuity table is 137.6316

Thus value after 22 years - 137.6316*6250= $860,197.74