Question

In 1986, a family member invested $100 each month into a savings account with an interest rate of 0.25% (that didn't change). In 2016, you decided you needed to use that saved up money for a big purchase, so you cash the savings account out. How much money should be in the account using the future value (fv) formula?

Answer 1

To calculate the future value of the savings account, we can use the formula for compound interest.

Step-by-step explanation:

To calculate the future value of the savings account, we can use the formula for compound interest:

FV = P(1 + r)^n

Where:

• FV is the future value
• P is the principal amount
• r is the interest rate
• n is the number of compounding periods

In this case, the principal amount is $100, the interest rate is 0.25% (or 0.0025 as a decimal), and the number of compounding periods is 360 (12 months x 30 years).

Using these values, we can calculate the future value:

FV = $100(1 + 0.0025)^360