Question

In order to accumulate enough money for a down payment on a house, a couple deposits $742 per month into an account paying 6% compounded monthly. If payments are made at the end of each period, how much money will be in the account in 7 years? Round to the nearest cent.

a) $63,857.12
b) $66,294.45
c) $72,318.62
d) $79,601.04

Answer 1

To find the amount of money that will be in the account in 7 years, use the formula for compound interest.

Step-by-step explanation:

To find the amount of money that will be in the account in 7 years, we can use the formula for compound interest:

Future Value = P(1 + r/n)^(nt)

Where:

• P is the monthly deposit of $742
• r is the annual interest rate of 6% (converted to a decimal, r = 0.06)
• n is the number of times that interest is compounded per year (n = 12, since it is compounded monthly)
• t is the number of years (t = 7)

Plugging in the values into the formula:

Future Value = 742(1 + 0.06/12)^(12*7)

Calculating this expression, we get a future value of $66,294.45. Therefore, the answer is option b) $66,294.45.