Question

Lauren plans to deposit $6000 into a bank account at the beginning of next month and $225/month into the same account at the end of that month and at the end of each subsequent month for the next 4 years. If her bank pays interest at a rate of 3%/year compounded monthly, how much will Lauren have in her account at the end of 4 years?

Answer 1

$18206.5

Explanation:

Considering, r = interest rate

n = number of intervals

t = duration of the payment

A = monthly installment

PV = Present Value

FV = Final Value

Using the formula

FV=PV (1+ r/n
`)^{nt-1` + a((1+ r/n
`)^{nt`-1/
`(r)/(n)`)

FV=6000
`(1+ (0.03)/(12) )^((12)(4)-1) +225((1+0.03/12)^((12)(4))-1 ))/(0.03/12)`

FV= 6747 + 11459.5

FV=18206.5

Her balance in 4 years is $18206.5