Question

Determine the value of the following investment 12 years from now. You are investing $300/month and have a fixed interest rate of 5% per year compounded monthly. How much is in the account at the end of the 12 years? Show ur work

Answer 1

• $59821.02

Explanation:

• Initial Investment P = $300
• Monthly deposit PMP = $300
• Interest rate r = 5% PA compounded monthly
• Time t = 12 years
• Number of compounds n = 12

Future value = Compound interest + Future value of series

Compound interest:

• P(1+r/n)^(nt) = 300(1 + 0.05/12)^144 = 545.95

Future value of series:

• PMT × {[(1 + r/n)(nt) - 1] / (r/n)} × (1 + r/n) =
• 300 {[(1 + 0.05/12)^144 - 1] / (0.05/12)} × (1 + 0.05/12) = 59275.07

Future value:

• 545.95 + 59275.07 = 59821.02