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Grade 11 Math:

Application

3. When Jennifer turned 12 years old, her grandmother gave her $100. Jennifer deposited

the money into a savings account that paid 3.5%/a compounded annually. Since then,

Jennifer’s grandmother has made an automatic deposit of $100 into her account every

year.

a) What is the total amount of the annuity on Jennifer’s 18th birthday? [3 marks]

b) How much of the annuity is interest earned? [1 mark]

Respuesta :

The future value of the annuity on Jennifer’s 18th birthday is $655.02

The interest earned is $55.02.

What is the future value of the annuity?

An annuity is a fixed payment of money over a specified period of time.

The formula for determining the future value of the annuity is: yearly deposit x annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

  • r = interest rate = 3.5%
  • n = number of years = 18 - 12 = 6

Future value of the annuity: $100 x [{(1.035^6) - 1} / 0.035}  = $655.02

Interest earned =  future value - total amount deposited

655.02 - (100 x 6)= $55.02

To learn more about annuities, please check: brainly.com/question/24108530

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