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Vernon Taber deposits $600 into an ordinary annuity after each quarter for 4 years. The account pays 4% interest compounded quarterly. Find the a) future value, and b) total interest earned.

Respuesta :

The future value is $10,354.72.

The total interest earned is $754.72.

What is the future value and the interest earned?

When an amount is compounded quarterly, it means that both the amount deposited and interest already earned increases in value every quarter.

The future value = quarterly deposit x annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

  • r = interest rate = 4% / 4 = 1%
  • n = number of years = 4 x 4 = 16

Annuity factor = [1.01^16) - 1 ] / 0.01 = 17.26

17.26 x 600 = $10,354.72

Total interest earned = future value - total amount deposited

Total amount deposited  = $600 X 4 X 4 = 9600

$10,354.72 - 9600 = $754.72

To learn more about annuities, please check:  https://brainly.com/question/24108530

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