Question

Find interest earned and the future value of an annuity with monthly payments of $150 for two years into an account that pays 4% interest per year compounded monthly.

Answer 1

interest earned= 12.47

the future value of an annuity= 162.47

Explanation:

Given Data:

Interest rate,r= 4%

time,t = 2 years

monthly payment, P= 150

n= 12 as monthly

At the end of 2 years, final investment A= ?

As per the interest formula for compounded interest

A= P(1+r/n)^nt

Putting the values in above equation

= 150(1+0.04/12)^24

= 162.47

Interest earned = A-P

= 162.47-150

= 12.47 !