00:01
In this problem, it is given that a person's grandfather put some money into an account on the day the person was born and when the person is 18 years old, the person can withdraw the money and currently the account has dollar 4 ,111 and it pays an interest of 4 percentage.
00:31
The first question is to determine the amount of money left on the 25th birthday.
00:39
So we know that on the 18th birthday, that is 18 years after the person is born, the balance in the account is $1 ,111.
00:53
And we need to find the amount left on the 25th birthday.
00:57
Now from the 18th birthday to the 25th birthday, there are.
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7 years.
01:06
So here we need to use the formula to determine the future value of investment where fv denotes the future value given the present value denoted as pv.
01:16
The formula is the future value is equal to the present value times 1 plus the interest rate the whole race to n where n denotes the time period.
01:25
So here the interest rate is 4 percentage which is 0 .04 when converted to decimal and for the first question we have the number of years is seven years after the 18th birthday.
01:40
So we have n is equal to 7 and the present value is the current balance in the account which is dollar 4 ,11.
01:47
So that we have the future value of this investment is 4111 times 1 plus 0 .04 the whole raise to 7 which is 4 ,111 times 1 .04 the whole raise to 7.
02:01
And this when approximated to nearest dollar is $5 ,410.
02:09
Therefore, the account will have $5 ,410 after 7 years, that is, on the 25th birthday...