Question

For 19 years, Janet saved $900 at the beginning of every month in a fund that earned 4.75% compounded annually.

a. What was the balance in the fund at the end of the period?
b. What was the amount of interest earned over the period?

Answer 1

a. The balance in the fund at the end of the 19-year period is $1,738.72. b. The amount of interest earned over the period is $838.72.

Step-by-step explanation:

a. To find the balance in the fund at the end of the period, we can use the formula for compound interest:

A = P(1+r/n)^(nt), where A is the ending balance, P is the principal (initial amount), r is the interest rate, n is the number of times the interest is compounded per year, and t is the number of years.

In this case, P = $900, r = 4.75% or 0.0475, n = 1 (compounded annually), and t = 19 years.

Plugging in these values into the formula, we get: A = 900(1+0.0475/1)^(1*19) = $1,738.72

So, the balance in the fund at the end of the period is $1,738.72.

b. To find the amount of interest earned over the period, we can subtract the principal from the ending balance. In this case, the interest earned would be: $1,738.72 - $900 = $838.72