Question

Christy Reed made a \(2,000 deposit in her savings account on her 21st birthday, and she has made another \)2,000 deposit on every birthday since then. Her account earns 7 percent compounded annually. How much will she have in the account after she makes the deposit on her 32nd birthday?

Short answer

The future value on her 32^nd birthday will be $35,776.90.

Step-by-step solution

Identification of the required information

Payment (PMT) = $2,000

Period (n) = 12, (From 21 to 32)

Interest Rate (i) = 7%

Future value (FV)

$$\begin{gathered} FV=PMT\times \left[\frac{{\left(1+i\right)}^n-1}{i}\right] \\ =\$2,000\times \left[\frac{{\left(1+7\%\right)}^{12}-1}{7\%}\right] \\ =\$35,776.90 \end{gathered}$$