Problem

Deposits of $75.00 are made at the end of every quarter for 7 years. What will the deposits amount to if interest is 7% compounded quarterly?
The future value is $.
(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

Answer

Expert–verified
Hide Steps
Answer

Final Answer: The future value of the deposits is approximately $2680.34.

Steps

Step 1 :The problem is asking for the future value of a series of equal deposits (an annuity) made at the end of each quarter for 7 years, with an interest rate of 7% compounded quarterly.

Step 2 :The formula for the future value of an annuity is: FV=P×[(1+rn)nt1]÷rn, where: FV is the future value of the annuity, P is the amount of each deposit, r is the annual interest rate (in decimal form), n is the number of times interest is compounded per year, and t is the number of years.

Step 3 :In this case, P=$75, r=0.07, n=4 (since interest is compounded quarterly), and t=7.

Step 4 :We can plug these values into the formula and calculate the future value.

Step 5 :FV=2680.3409829732614

Step 6 :The future value of the annuity is approximately $2680.34. This is the total amount that the series of deposits will amount to after 7 years, with interest compounded quarterly at a rate of 7%.

Step 7 :Final Answer: The future value of the deposits is approximately $2680.34.

link_gpt