If you put $10,000 at the end of each year into a savings account that pays interest at the rate of 5 percent a year, how much would you have after 4 years? Use the Appendix B. Round the answer to the nearest cent. Round FV-factor to three decimal places.
To calculate the amount you would have after 4 years, we can use the formula for the future value of an ordinary annuity.
The formula for the future value of an ordinary annuity is given by:
FV = P * ( (1 + r)^n - 1 ) / r
Where:
FV is the future value
P is the periodic payment (in this case $10,000)
r is the interest rate (in this case 5% or 0.05)
n is the number of periods (in this case 4 years)
Using this formula, we can substitute the given values:
FV = 10000 * ( (1 + 0.05)^4 - 1 ) / 0.05
Calculating this, we get:
FV = 10000 * (1.05^4 - 1) / 0.05
To obtain the value of 1.05^4, you can use a calculator.
1.05^4 = 1.21550625
Substituting this value back into the formula, we get:
FV = 10000 * (1.21550625 - 1) / 0.05
Now, simplify the expression:
FV = 10000 * (0.21550625) / 0.05
FV = 4300.63
Rounding the result to the nearest cent, you would have approximately $4300.63 after 4 years.