Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 8 - Personal Finance - 8.5 Annuities, Methods of Saving, and Investments - Exercise Set 8.5: 47

Answer

The amount saved after 30 years is $\$6354$. The original statement does not make sense as we would not be able to retire comfortably with just $\$6354$.

Work Step by Step

This is the formula we use to calculate the value of an annuity: $A = \frac{P~[(1+\frac{r}{n})^{nt}-1]}{\frac{r}{n}}$ $A$ is the future value of the annuity $P$ is the amount of the periodic deposit $r$ is the interest rate $n$ is the number of times per year the interest is compounded $t$ is the number of years $A = \frac{P~[(1+\frac{r}{n})^{nt}~-1]}{\frac{r}{n}}$ $A = \frac{(\$10)~[(1+\frac{0.035}{12})^{(12)(30)}~-1]}{\frac{0.035}{12}}$ $A = \$6354$ The amount saved after 30 years is $\$6354$. The original statement does not make sense as we would not be able to retire comfortably with just $\$6354$.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.