80.2k views
23 votes
if you invest $200 the end of each month over the next 20 years in a mutual fund that has a nominal annual rate of 12% how much will you get at the end of 20 years

User MrWuf
by
8.5k points

1 Answer

7 votes

Answer:

I will get $197,851 at the end of the 20 years.

Step-by-step explanation:

Note: It is assumed the interest is compounded monthly

Use the following formula to calculate the amount to be received after 20 years

Future value of annuity = Annuity payment x ( ( ( 1 + periodic interest rate )^ Numbers of periods ) - 1 ) / periodic interest rate )

Where

Annuity Payment = $200 monthly

Periodic Interest rate = Nominal Interest rate / Numbers of periods in a year = 12% / 12 months = 1%

Numbers of periods = Numbers of years x Numbers of periods in a year = 20 years x 12 months = 240 months

Placing values in the formula

Future value of annuity = $200 x ( ( ( 1 + 1% )^240 ) - 1 ) / 1% )

Future value of annuity = $197,851.07

Future value of annuity = $197,851

User Jorjon
by
8.8k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories