To create a college fund a parent makes a sequence of 15 yea

To create a college fund, a parent makes a sequence of 15 yearly deposits of $1500 each in a savings account on which interest is compounded annually at 3.7%.

Find the amount of the annuity.

Solution

The formula for annual compound interest, including principal sum, is:
A = P (1 + r/n) ^(nt)

Where:

A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for

So, A = P (1 + r/n) ^(nt)

P = 1500

n = 1

r = 0.037

t = 15

A=1500(1.037)^15

A=1500*1.72457

A=$2586.855