Math Problem Statement
James deposits $1440.71$1440.71 each quarter into an annuity account for his child's college fund in order to accumulate a future value of $95,000$95,000 in 1313 years. How much of the $95,000$95,000 will James ultimately deposit in the account, and how much is interest earned? Round your answers to the nearest cent, if necessary.
Solution
We can calculate the total amount James deposits and the interest earned by using the following steps:
Step 1: Calculate the Total Deposits
James deposits $1,440.71 each quarter for 13 years.
There are 4 quarters in a year, so over 13 years, the total number of deposits is:
The total amount James deposits is:
Step 2: Calculate the Interest Earned
The interest earned is the difference between the future value of the annuity and the total amount deposited. The future value of the annuity is $95,000, so:
Now let's calculate these values.### Results:
- Total Deposits: James will deposit $74,916.92 into the account.
- Interest Earned: The interest earned over the 13 years is $20,083.08.
Would you like more details or have any questions?
Here are 5 related questions:
- How can we calculate the interest rate required for this annuity?
- What would happen if the deposit frequency changed (e.g., monthly instead of quarterly)?
- How would the total interest change if James deposited more per quarter?
- What if James wants to reach the same future value in 10 years instead of 13?
- How would inflation affect the future value of the annuity?
Tip: Annuities grow faster with more frequent deposits due to compound interest, so increasing deposit frequency can lead to more interest earned.
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Math Problem Analysis
Mathematical Concepts
Annuities
Interest Calculation
Compound Interest
Formulas
Total deposits = Deposit per quarter × Number of quarters
Interest earned = Future value - Total deposits
Theorems
Annuity Formula
Compound Interest Theorem
Suitable Grade Level
Grades 9-12
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