Assume that you invest 1250 at the end of each of the next 1

Assume that you invest $1250 at the end of each of the next 15 years in a mutual fund. You currently have $10,000 in the mutual fund. The annual rate of interest that you expect to earn in this account is 4.35%. The amount in the account at the end of 15 years is a. $28,750.00 b. $25,690.50 c. $44,630.81 d. $37,009.35 e. $58,940.30

Solution

Future value = Present value ( 1 + R)ⁿ

Future value = 10,000 ( 1 + 0.0435)¹⁵

Future value = 18,940.29771

Future value of annuity = Annuity * [ ( 1 + R)ⁿ - 1] / R

Future value of annuity = 1250 * [ ( 1 + 0.0435)¹⁵ - 1] / 0.0435

Future value of annuity = 1250 * 20.552409

Future value of annuity = 25,690.51065

Future value = 25,690.51065 + 18,940.29771 = $44,630.81