Question #270938

On 10th January in each of the year 1964 to 1979 inclusive,an investor invested 500 pounds in a special bank savings account. On 10th January 1983 the investor withdrew his savings, given that the entire period the bank used an annual interest rate of 7% for his special savings account. Find the sum withdrawn by the investor

1
Expert's answer
2021-11-25T10:46:48-0500

 We first find the accumulated value at the end of the 15 years(on 1979 10th January) of an annuity due as follows;


Accumulated value on 1979 10th January= 500s¨n=500((1+i)n1d)500\ddot{s}_{n\rceil}=500({(1+i)^{n}-1\over d})


Where n=15n=15 years , i=0.07i=0.07 and d=i1+i=0.071+0.07=0.071.07=0.06542056074766d={i\over 1+i}={0.07\over 1+0.07}={0.07\over 1.07}=0.06542056074766


500s¨n=500((1+i)n1d)500\ddot{s}_{n\rceil}=500({(1+i)^{n}-1\over d})


=500((1+0.07)1510.06542056074766)=500({(1+0.07)^{15}-1\over 0.06542056074766})


=500((1.07)1510.06542056074766)=500({(1.07)^{15}-1\over 0.06542056074766})


=13444.0267754679=13444.0267754679 pounds

We then find the accumulated value at the end of the 4 years (On 10th January 1983) as follows;


accumulated value On 10th January 1983=13444.0267754679(1+0.07)4=13444.0267754679(1+0.07)^4

=13444.0267754679(1.07)4=13444.0267754679(1.07)^4

=17622.3766556165=17622.3766556165 pounds

\therefore The investor widthdraw 17622.376655616517622.3766556165 pounds



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