Question

If you deposit $500 dollars “Each Month!” Into an account paying 3% interest, compounded monthly, how much would be in said account after 4 years.

Please show proper work and give a good explanation in regards as to how you got your answer

Answer 1

26029.26

Explanation:

Assuming we are investing the 500 at the end of the period and starting with 500 in the account

[ P(1+r/n)^(nt) ]+PMT × {[(1 + r/n)^(nt) - 1] / (r/n)}

PMT = the monthly payment

r = the annual interest rate (decimal)

n = the number of times that interest is compounded per year

t = the time in years

[ 500(1 + .03/12)^(4*12) ]+500 × {[(1 + .03/12)^(4*12) - 1] / .03/12)}

[ 500(1 + .0025)^(48) ]+500 × {[(1 + .0025)^(48) - 1] / .0025)}

563.66 +25465.60