Question

Suppose you invest $100 a month in an annuity that earns 4% APR compounded *

monthly. How much money will you have in this account after 2 years?
O$1,004.48
O $2,400.18
O $2,518.59
O$3,908.26

Answer 1

Answer: (C) $2,518.59.

Explanation:

To find the amount of money you will have in the account after 2 years, we can use the formula for the future value of an annuity:

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

where:

FV = the future value of the annuity

P = the monthly payment, which is $100

r = the annual interest rate, which is 4% expressed as a decimal (0.04)

n = the number of times the interest is compounded in a year, which is 12 (monthly)

t = the time the money is invested for, which is 2 years

Substituting the given values into the formula, we get:

FV = 100 * (((1 + 0.04/12)^(12*2) - 1) / (0.04/12))

FV = 100 * (((1.00333333333)^24 - 1) / (0.00333333333))

FV = 2,518.59 (rounded to the nearest cent)

Therefore, you will have $2,518.59 in the account after 2 years. Answer: (C) $2,518.59.