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A woman deposits $9000 at the end of each year for 15 years in an account paying 7% interest compounded annually
A woman deposits $9000 at the end of each year for 15 years in an account paying 7% interest compounded annually.
(A) Find the final amount she will have on deposit?
(B) Her brother-in-law works in a bank that pays 6% compounded annually. If she deposits money in this bank instead of the other one, how much will she have in her account?
(C) How much would she lose over 15 years by using her brother-in-law's bank?
Expert Solution
A) Computation of Future Value using FV Function in Excel:
=fv(rate,nper,-pmt,pv)
Here,
FV = Future Value = ?
Rate = 7%
Nper = 15 years
PMT = $9,000
PV = 0
Substituting the values in formula:
=fv(7%,15,-9000,0)
FV or Future Value = $226,161.20
So, the amount she will have on the deposit is $226,161.20
B) Computation of Future Value using FV Function in Excel:
=fv(rate,nper,-pmt,pv)
Here,
FV = Future Value = ?
Rate = 6%
Nper = 15 years
PMT = $9,000
PV = 0
Substituting the values in formula:
=fv(6%,15,-9000,0)
FV or Future Value = $226,161.20
So, the amount she will have on the deposit is $209,483.73
C) Computation of Amount She will loose:
Amount She will Loose = $226,161.20 - $209,483.73 = $16,677.47
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