Question

I will deposit $1000 per year for 25 years.� Assuming a 5% compound interest rate, what will my account be worth in 25 years? �Now assume a 10% compound rate and calculate my future balance

Answer 1

After 25 years, 26 deposits of $1000 will have been made, but the last deposit will not have earned interest. The amount accumulated with annually compounded interest after n years at interest rate r, with annual deposits of x, is

x [(1 + r)^(n+1) - 1]/r

With x = 1000, r = 0.05 and n = 25,

Balance = 1000[1.05)^26 -1].05
= $51,113.45

At 10% interest, it becomes $109,181.77