Assume that you are 23 years old and that you place $3,000 year-end deposits each year into a stock index fund that earns an average of 9.5% per year for the next 17 years

Question

How much money will be in the account at the end of 17 years? How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5% per year but you discontinue making new contributions? How much money would you have at the end of 17 years if you had made the same number of deposits but at the beginning of the year instead of at the end of the year? How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5% per year but you discontinued making new contributions?
What will be an ideal response?

Answer 1

Answer: FV = PMT × = $3,000 × = $116,140.50.
Fifteen years later, FV = PV × (1 + r)n = $116,140.50 × (1.095)15 = $453,101.48.
Because these are annuities due, the solution is to multiply each answer by (1 + r).
The solutions are $116,140.50 × (1.095) = $127,173.85 and $453,101.48 × (1.095) = $496,146.12.