Question

Barbara wants to restore her '66 Mustang in 4 years. She puts $200 into an account every month that pays 4.5% interest, compounded monthly. How much is in the account after 4 years?

Answer 1

$10496.77

Explanation:

We have been given that Barbara puts $200 into an account every month that pays 4.5% interest, compounded monthly.

To find the money in the account after 4 years, we will use future value formula.

`FV=R((1+(r)/(n))^(nt)-1)/((r)/(n)))`, where,

R = Regular deposits,

r = Interest rate in decimal form

n = Number of times interest in compounded per year,

t = Time in years.

`4.5\%=(4.5)/(100)=0.045`

Substitute given values:

`FV=\$200((1+(0.045)/(12))^(12*4)-1)/((0.045)/(12)))`

`FV=\$200((1+0.00375)^(48)-1)/(0.00375))`

`FV=\$200((1.00375)^(48)-1)/(0.00375))`

`FV=\$200(1.1968143774194609-1}{0.00375})`

`FV=\$200(0.1968143774194609}{0.00375})`

`FV=\$200(52.4838339785229066667)`

`FV=\$10496.76679570458133334`

`FV\approx \$10496.77`

Therefore, there will be an amount of $10496.77 in the account after 4 years.