CtP1rnn 11rnnt 11rnn this is the formula to use How much wi

C(t)=(P(1+r/n)^n [1-(1+r/n)^nt ])/(1-(1+r/n)^n ) this is the formula to use

How much will you have accumulated over a period of 30 years if, in an IRA which has a 10% interest rate compounded quarterly, you annually invest:

a. $1 Data P=$1 r=0.10 t=30 years n=1 C(t)=1*((1+0.10/1)^1 [1-(1+0.10/1)^(1*30) ])/(1-(1+0.10/1)^1 )=$148.58

b. $4,000 Data P=$4,000 r=0.10 t=30 years n=1 C(t)=4,000*((1+0.10/1)^1 [1-(1+0.10/1)^(1*30) ])/(1-(1+0.10/1)^1 )=$148,575.22

c. $10,000 Data P=$10,000 r=0.10 t=30 years n=1 C(t)=10,000*((1+0.10/1)^1 [1-(1+0.10/1)^(1*30) ])/(1-(1+0.10/1)^1 )=$668,588.48

Part (a) is called the effective yield of an account. How could Part (a) be used to determine Parts (b) and (c)? (Your answer should be in complete sentences free of grammar, spelling, and punctuation mistakes.) Part b) can be obtained multiplying the results of Part a) by 1000, and Part c) can be obtained multiplying this result by 10,000.

Solution

Part a is called the present value annuity factor. This is the present value of annuity of 1 dollar.

Part b and c can be obtained by multiplying the notional that is 4000 and 10000 with the factor respectively.