Answer :
Answer:
Formula: Future value of annuity
In 20 years: $249,875
Total Interest: $99,875
Step-by-step explanation:
Use the formula for future value:
FV =
P = $6,000
r = 0.04
n = 1
t = 25
FV =
FV = $249,875
To find the total interest earned, first find the total value of the deposit payments:
$6,000 annual payments for 25 years = 6,000 • 25
= $150,000
(I copied that explanation from somewhere else so its a little messed up. I just couldn't explain it properly. Hope this helps!)
Account balance In 20 years is $249,875 and total interest earned is $99,875.
What is the future value?
The FV formula assumes a constant rate of growth and a single up-front payment left untouched for the duration of the investment. The FV calculation can be done one of two ways, depending on the type of interest being earned.
We have,
P = $6,000
r = 0.04
n = 1
t = 25
We know the formula for future value
FV= PV [tex](1 + r)^{n}[/tex].
where:
P=Investment amount
R=Interest rate
T=Number of years
According to the question
FV=$6,000×(1+0.04
FV = $249,875
To find the total interest earned, first find the total value of the deposit payments:$6,000 annual payments for 25 years = 6,000 × 25= $150,000
Total interest earned = FV - annually payment for 25 year = $249,875 - $150,000 = $99,875
To learn more about future value from here
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