Question

a. Use the appropriate formula to find the value of the annuity.b. Find the interest.Periodic Deposit$4000 at the end of each yearRate3% compounded annuallyTime10 yearsa. The value of the annuity is $ 45,856.(Do not round until the final answer. Then round to the nearest dollar as needed.)

Answer 1

Solution

Using the formula

$A=P(1+\frac{r}{n})^{nt}$

where

P is the principal = $4000

r = rate = 3% = 0.03

t = 10

n = 1 (Compounded Annualy)

Using the given formula

$\begin{gathered} A=\frac{P((1+r)^t-1)}{r} \\ \\ \Rightarrow A=\frac{4000((1+0.03)^{10}-1)}{0.03}=\ 45855.52 \end{gathered}$

Since, Interest = Amount - Principal