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Gina has planned to start her college education four years from now
Gina has planned to start her college education four years from now. To pay for her college education, she has decided to save $1,000 a quarter for the next four years in a bank account paying 12 percent interest. How much will she have at the end of the fourth year?
Expert Solution
Computation of Amount She will have in the account at the End of Fourth Year:
Future value of Annuity = P (((1+r)n -1)/r)
Here,
P = Periodic Payment = $1,000 per quarter
r = Interest Rate = 12%/4 = 3% per quarter
n = Number of Compounding Periods = 4 years*4 quarters = 16
Future value of Annuity = 1000*((((1+0.03)^16 -1)/0.03)
= 1000*20.15688
Future value of Annuity = $20,156.88 or $20,157
So, Amount She will have in the account at the End of Fourth Year is $20,157.
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