Aishah wishes to deposit RM1,000 annually for five years into a savings account paying 6% annual interest. How much money will Aishah have at the end of the five years?
To find the total amount of money Aishah will have at the end of the five years, we need to calculate the future value of each annual deposit and then sum them up.
First, we calculate the future value of each annual deposit using the formula:
Future Value = Present Value * (1 + Interest Rate)
For the first year, the future value of Aishah's deposit is:
Future Value for Year 1 = RM1,000 * (1 + 0.06)
= RM1,000 * 1.06
= RM1,060
For the second year, the future value of Aishah's deposit is:
Future Value for Year 2 = RM1,000 * (1 + 0.06) * (1 + 0.06)
= RM1,000 * 1.06 * 1.06
= RM1,060 * 1.06
= RM1,123.60
Similarly, for the third, fourth, and fifth years, the future values of Aishah's deposits are:
Future Value for Year 3 = RM1,000 * (1 + 0.06) * (1 + 0.06) * (1 + 0.06)
= RM1,000 * 1.06 * 1.06 * 1.06
= RM1,123.60 * 1.06
= RM1,191.016
Future Value for Year 4 = RM1,000 * (1 + 0.06) * (1 + 0.06) * (1 + 0.06) * (1 + 0.06)
= RM1,000 * 1.06 * 1.06 * 1.06 * 1.06
= RM1,191.016 * 1.06
= RM1,262.47696
Future Value for Year 5 = RM1,000 * (1 + 0.06) * (1 + 0.06) * (1 + 0.06) * (1 + 0.06) * (1 + 0.06)
= RM1,000 * 1.06 * 1.06 * 1.06 * 1.06 * 1.06
= RM1,262.47696 * 1.06
= RM1,338.2251616
Finally, we sum up all the future values to find the total amount Aishah will have at the end of the five years:
Total amount = Future Value for Year 1 + Future Value for Year 2 + Future Value for Year 3 + Future Value for Year 4 + Future Value for Year 5
= RM1,060 + RM1,123.60 + RM1,191.016 + RM1,262.47696 + RM1,338.2251616
= RM6,275.36
Therefore, Aishah will have RM6,275.36 at the end of the five years.