Question

Recently, More Money 4U offered an annuity that pays 6.3% compounded monthly. If $1,986 is deposited into this annuity every​ month, how much is in the account after 8 ​years? How much of this is​ interest?

Answer 1

`A = 1986(1+ (0.063)/(12))^(12*8) =3283.153`

So then after 8 years we will have in the account 3283.153

And in order to find the interest we can do the following operation:

`I = 3283.153 -1986 = 1297.153`

Explanation:

For this case we can use the formula for the future value using compound interest given by:

`A = P (1+ (r)/(n))^(nt)`

Where P= 1986 the initial amount invested. r = 0.063 represent the interest rate. n=12 represent the number of times that the rate is compounded in a year. And t =8 years . Replacing the info we got:

`A = 1986(1+ (0.063)/(12))^(12*8) =3283.153`

So then after 8 years we will have in the account 3283.153

And in order to find the interest we can do the following operation:

`I = 3283.153 -1986 = 1297.153`