Question

Andrew deposits $503.81 each month into an annuity account for his child's college fund in order to accumulate a future value of $90,000 in 12 years. How much of the $90,000 will Andrew ultimately deposit in the account, and how much is interest earned?

Answer 1

Based on the amount deposited into the account every month, the amount that Andrew will deposit in the account is $72,548.64. The interest earned will be $17,451.36.

What amount does Andrew deposit?

This can be found by the formula:

= Amount deposited every month x Number of years x Number of months in a year

= 503.81 x 12 x 12

= $72,548.64

What amount of interest is earned?

This can be found as:

= Future value of amount - Amount deposited

= 90,000 - 72,548.64

= $17,451.36

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