Homework help needed

Accounting
Tutor: None Selected Time limit: 1 Day

Gina has planned to start college education in 4 years from now. To pay for her college education, she has decided to save $1000 a quarter for the next 4 years in a bank account paying 12% interest (Compounded Quarterly). How much will she have at the end of 4th year? (Round to the nearest whole dollar)

Jun 22nd, 2015

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Working on it now. Will have it in a few minutes :)

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Jun 23rd, 2015

okay, thank you

Jun 23rd, 2015

The answer is $20,157. Give me just a bit more time to type out the steps for you:) 

Jun 23rd, 2015

SO, I tried to make this as simple as possible. First, we need to look at the Future Value of Annuity which can be calculated through the equation:

Future Value of Annuity (FVA) = Annuity * [(1+i)n - 1] / i

Key: 

i = Interest rate,

n = Number of payments

Pluggin in our numbers, 

FVA = $1,000 * [(1+12%/4)4*4 - 1] / (12%/4)

  = $1,000 * [1.605-1] / 3% --> 1000/.03= 3,333.33 . And 1.605-1 = .605. So now we just multiply the two numbers: 

  = 3,333.33 * 0.605

  = 20,156.88

Future Value of Annuity (FVA) = $20,156.88. --> ROUND TO NEAREST DOLLAR $20,157


Jun 23rd, 2015

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