3. Another client, Wynona, decides that she will invest $5,000 per year in a 6% annuity for the first ten years, then $6,000 for the next ten years, and then $4,000 per year for the last ten years, how much will she accumulate?
[Hint: Treat each ten-year period as as separate annuity and compute the Future Value. After the ten years, assume that the value will continue to grow at compound interest for the remaining years of the 30 years. Use tables from Unit 6 to compute compound interest.]© BrainMass Inc. brainmass.com June 4, 2020, 1:05 am ad1c9bdddf
First of all, calculate the future value of the annuity for the first ten years.
use FV(10)= PMT [((1 + i)^n - 1) / i] to calculate the value at the end of year 10,
FV(10)=5000*[((1 + 6%)^10 - 1) / 6%]=65903.97
The expert computes the future value of separate annuity.