Question

Newman Inc. will deposit $55,100 in a 10% fund at the end of each year for 10 years beginning December 31, 2020. Click here to view factor tables What amount will be in the fund immediately after the last deposit? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.) Amount in fund $

Answer 1

The future value of an annuity due

Annual Deposits (P) = $55,100 per year

Interest rate (r) = 10.00% per year

Number of years (n) = 10 Years

Future Value of an Annuity Due is calculated by using the following Formula

Future Value of an Annuity Due = (1 + r) x P x [{(1+ r) ⁿ - 1} / r]

= (1 + 0.10) x $55,100 x [{(1 + 0.10)¹⁰ – 1} / 0.10]

= 1.10 x $55,100 x [(2.59374246 – 1) / 0.10]

= 1.10 x $55,100 x [1.59374246 / 0.10]

= 1.10 x $55,100 x 15.9374246

= $965,967

“Hence, the amount will be in the fund immediately after the last deposit will be $965,967”