Kristin opens a savings account with $3500. She deposits $2400 every year into the account that has a 0.65% interest rate, compounded quarterly. If she doesn't withdraw any money, what will the account balance be in 10 years?

Question

anonymous · Answer

@jim_thompson5910

anonymous · Answer

$28,551.51
$28,511.25
$24,816.65
$24,776.39

jim_thompson5910 · Answer

this is a future value of annuity problem

do you have a formula for that?

anonymous · Answer

yes i think so. let me find it real quick

anonymous · Answer

is this it?

jim_thompson5910 · Answer

yes, FVOA = future value of ordinary annuity

jim_thompson5910 · Answer

I just need to figure out what to do with the initial $3500

anonymous · Answer

thats what confused me

jim_thompson5910 · Answer

yeah it's throwing me off too, but I'm looking for ways to address it. One moment

anonymous · Answer

take your time, thank you for trying

anonymous · Answer

could it be a combination of lump sum and ordinary annuity?

anonymous · Answer

probably not but i'm just thinking of different equations

jim_thompson5910 · Answer

that's possible

you may have to use FV = PV*(1+r/n)^(n*t) to figure out how much money Kristin would have if she did NOT deposit any money at all. This is just for the $3500 that's already in there.

and then you'd add on the annuity part

anonymous · Answer

alright i'll see what i get

anonymous · Answer

i got 3734.86 would i solve the FVOA equation and just add them together?

anonymous · Answer

nope it came out way too high

jim_thompson5910 · Answer

well we at least know the answer is NOT around 24,000 because over 10 years, Kristin would deposit 10*2400 = 24000 dollars on top of the 3500 already there

so it has to be either A or B

anonymous · Answer

so should i just guess?

jim_thompson5910 · Answer

no, let me still try, one sec

anonymous · Answer

oh alright thank you

anonymous · Answer

this class is kicking my butt :(

jim_thompson5910 · Answer

do they offer any other future value formula?

anonymous · Answer

only for lump sum ---> FV = PV(1 + i)nt

jim_thompson5910 · Answer

I'm looking through here http://faculty.atu.edu/mfinan/actuarieshall/Formulas.pdf to see if I can find anything

anonymous · Answer

she that looks like Spanish to me haha i didn't understand any of it.

jim_thompson5910 · Answer

I think I figured it out, but I'll need a bit of time

anonymous · Answer

take your time

jim_thompson5910 · Answer

sorry this is taking forever, but what I'm doing now is trying out different values and methods in excel

jim_thompson5910 · Answer

I'm trying to get to either $28,551.51 or $28,511.25