Question

Suppose you invest $75 a month in an annuity that earns 3% APR compounded monthly. How much money will you have in this account after 3 years?

A. $2650.00
B. $2821.54
C. $4750.25
D. $4745.70

Answer 1

it is $2821.54

Explanation:

Answer 2

Option B. $2821.54

Explanation:

we know that

The formula for the future value of an ordinary annuity is equal to:

`FV=P[ ((1+ (r)/(n) )^(nt) -1)/( (r)/(n) ) ]`

where

`FV` is the future value

`P` is the periodic payment

`r` is the interest rate in decimal form

`n` is the number of times the interest is compounded per year

`t` is the number of years

In this problem we have

`P=\$75`

`t=3\ years`

`r=3\%=0.03`

`n=12`

Substitute in the formula above

`FV=\$75[((1+ (0.03)/(12))^(12*3) -1)/( (0.03)/(12))]`

`FV=\$75[((1.0025)^(36) -1)/( 0.0025)]=\$2,821.54`