Problem

A man deposits $18,000 at the beginning of each year for 10 years in an account paying 8% compounded annually. He then puts the total amount on deposit in another account paying 9% compounded semiannually for another 9 years. Find the final amount on deposit after the entire 19-year period.

He will have a final amount of $ after the entire 19-year period. (Simplify your answer. Round to the nearest cent as needed.)

Answer

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Answer

So, the man will have a final amount of $593,848.86 after the entire 19-year period.

Steps

Step 1 :For the first 10 years, the man deposits 18,000 at the beginning of each year in an account paying 8% compounded annually. The future value of these deposits can be calculated using the formula for the future value of a series of annuity payments made at the beginning of each period: FV=P×((1+r)n1r), where P is the payment amount, r is the interest rate per period, and n is the number of periods. Substituting the given values, we get FV=18000×((1+0.08)1010.08).

Step 2 :Calculating the above expression, we get FV$245,886.58. This is the total amount the man has in his account after 10 years.

Step 3 :For the next 9 years, the man puts the total amount on deposit in another account paying 9% compounded semiannually. The future value of this deposit can be calculated using the formula for the future value of a single lump sum compounded more than once per year: FV=P×(1+r/n)nt, where P is the principal amount, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time in years. Substituting the given values, we get FV=245886.58×(1+0.09/2)2×9.

Step 4 :Calculating the above expression, we get FV$593,848.86. This is the total amount the man has in his account after the entire 19-year period.

Step 5 :So, the man will have a final amount of $593,848.86 after the entire 19-year period.

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