# Question 12.17 ActEd (FV problem)

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A woman pays 5% of her annual salary of R30 000 into a fund at the start of each of the next 15 years. If the fund is expected to earn 8% interest each year and her salary is expected to increase by 6% each year, calculate the approximate amount of the fund at the end of the 15 years.

PV=1500 + 1500*(1.06/1.08)^1 + 1500*(1.06/1.08)^2 + ... + 1500*(1.06/1.08)^14

(1/1+j)=(1.06/1.08)

I got a new rate of j=0.01887..

I then used this j to calculate a future value for this annuity... Got the wrong answer :(

The memo states that I must first get a PV using the j, then calculate the FV using 8%. Why is this so? Why take the "long route"?

$$FV = [30000(0.05)]\times[(1.08)^{15} + (1.06)^1(1.08)^{14} + (1.06)^2(1.08)^{13} + \dots + (1.06)^{14}(1.08)^1]$$