Question

Matt can save $225 per month that he puts into a savings

account earning 5% annual interest. How much will he have
saved after 2 years?

Answer 1

FV ≈ $5,673.56

Explanation:

To calculate the total amount that Matt will have saved after 2 years of saving $225 per month at an annual interest rate of 5%, we can use the formula for the future value of an annuity:

FV = P * (((1 + r/12)^(n*12) - 1) / (r/12))

where:

FV is the future value of the annuity

P is the periodic payment (in this case, $225 per month)

r is the interest rate per year (in this case, 5%)

n is the number of years (in this case, 2)

Substituting the given values, we get:

FV = $225 * (((1 + 0.05/12)^(2*12) - 1) / (0.05/12))

Using a calculator, we get:

FV ≈ $5,673.56

Therefore, after 2 years of saving $225 per month at an annual interest rate of 5%, Matt will have saved approximately $5,673.56.