Question
On January 1, you plan to take a trip around the world upon graduation four years from now. Your grandmother wants to deposit sufficient funds
On January 1, you plan to take a trip around the world upon graduation four years from now. Your grandmother wants to deposit sufficient funds for this trip in an investment account for you. On the basis of a budget, you estimate that the trip currently would cost $21,500. Being the generous and sweet lady she is, your grandmother decided to deposit $5,125 in the fund at the end of each of the next four years, starting on December 31, 2021. The account will earn 8 percent annual interest, which will be added to the account at each year-end. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1, Financial Calculator) (Use tables, Excel, or a financial calculator.)
- How much money will you have for the trip at the end of year 4 (i.e., after four deposits)?
- What is the total amount of interest earned over the four years?
- How much interest revenue did the fund earn in each of the four years, starting in 2021?
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