Question

If you put $10 in a savings account at the beginning of each month for 15 years, how much money will be in the account at the end of the 10th year? assume that the account earns 12% compounded monthly and round to the nearest $1.

Answer 1

To solve this question we use the formula for future annuity. This is given by:
FV=p[[(1+r)^n-1]/r]
where:
FV=future value
p=principle
r=rate
n=number of terms
from the question:
p=$10
r=12%=1%=0.01
n=120 terms
thus plugging in the values in the formula we get the value after 10 years we shall have
FV=10[[(1+0.01)^120-1]/0.01]
simplifying this we obtain
FV=2300.387~$2300.40