Questions: A woman deposits 360 in her daughter's bank account at the end of each year for 6 years. The account earns 6% interest compounded annually. Find the amount in the account after the 6th deposit.
The amount of the annuity is approximate 360.
The interest earned is approximately 78.34.
The amount in the account is approximately 2,595.39.
Transcript text: A woman deposits $360 in her daughter's bank account at the end of each year for 6 years. The account earns 6% interest compounded annually. Find the amount in the account after the 6th deposit.
The amount of the annuity is approximate $360.
The interest earned is approximately $78.34.
The amount in the account is approximately $2,595.39.
Solution
Solution Steps
To solve this problem, we need to calculate the future value of an annuity. The future value of an annuity can be calculated using the formula:
\[ FV = P \times \frac{(1 + r)^n - 1}{r} \]
where:
\( P \) is the annual payment ($360)
\( r \) is the annual interest rate (6% or 0.06)
\( n \) is the number of years (6)
Solution Approach
Identify the values for \( P \), \( r \), and \( n \).
Use the future value of an annuity formula to calculate the amount in the account after the 6th deposit.
Step 1: Identify the Given Values
We are given the following values:
Annual payment, \( P = 360 \)
Annual interest rate, \( r = 0.06 \)
Number of years, \( n = 6 \)
Step 2: Use the Future Value of an Annuity Formula
The future value of an annuity can be calculated using the formula:
\[ FV = P \times \frac{(1 + r)^n - 1}{r} \]
Step 3: Substitute the Given Values into the Formula
Substituting the given values into the formula, we get:
\[ FV = 360 \times \frac{(1 + 0.06)^6 - 1}{0.06} \]