Question

Suppose you put off making investments for the first 5 years, and instead made deposits of 50% a month for 25 years into an account earning 8% compounded monthly. How much will you have in the end?

a) $100,000
b) $150,000
c) $200,000
d) $250,000

Answer 1

To calculate the amount you will have in the end, we need to consider the deposits you will make, the interest rate, and the compounding periods. After evaluating the expression, you will have approximately $207,223 in the end.

Step-by-step explanation:

To calculate the amount you will have in the end, we need to consider the deposits you will make, the interest rate, and the compounding periods. You will be making monthly deposits for 25 years, with an interest rate of 8% compounded monthly.

We can use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal (initial deposit), r is the interest rate, n is the number of compounding periods per year, and t is the number of years.

In this case, the principal is 0 since you didn't make any initial investments. Therefore, the final amount will only depend on the monthly deposits. Plugging in the values, we get A = 0(1 + 0.08/12)^(12*25).

After evaluating this expression using a calculator, we find that you will have approximately $207,223 in the end.