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Suppose you invest every quarter, for 20 years, in an annuity that pays 5% interest, compounded quarterly. At the end of the 20 years, you have $100,000. How much of this total is interest? Enter your answer rounded to the nearest hundred dollars. Omit the comma. ( 4,320.00 should be entered as 4300).

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facundobuzzetti

Answer:

Interest= $62983

Explanation:

Giving the following information:

Number of periods = 20*4 = 80 quarters

Interest rate= 0.05/4= 0.0125

Future Value= $100,000

To calculate the interest earned, we need to determine the initial investment (PV) and deduct the interest from the final value.

PV= FV/(1+i)^n

PV= 100,000/(1.0125^80)

PV= 37,016.68

Interest= 100,000 - 37,016.68

Interest= $62,983.32

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