Question

Assume that you plan to buy a condo 5 years from now, and you estimate that you can save $2,500 per year. You plan to deposit the money in a bank account that pays 4% interest, and you will make the first deposit at the end of the year. How much will you have after 5 years

Answer 1

Based on the fact that you will deposit $2,500 per year to buy the condo, the amount that you will have in 5 years is $13,540.81

How much will the amount grow to in 5 years?

The fact that the amount is a specific amount every year makes it an annuity.

The value in 5 years will the be the future value of that annuity which can be found as:

= Annuity x ( ( 1 + rate) ^ number of years) - 1) / rate

= 2,500 x ( (1 + 4%)⁵ - 1) / 4%

= $13,540.81

Find out more on the future value of an annuity at https://brainly.com/question/5303391

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