Question

A. The parents of a baby wish to establish a college fund for their child. They deposit

$100 every month into an account for 18 years. The money earns 6 3/8% interest
compounded monthly. Find the future value of this account.

Answer 1

FV= $38,735.32

Explanation:

Giving the following information:

Monthly deposit= $100

Number of periods= 18*12= 216 months

The interest rate is confusing. I will assume an interest rate of 6%. If it is not correct, just change it in the formula.

Monthly interest rate= 0.06/12= 0.005

To calculate the future value, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit

FV= {100*[(1.005^216) - 1]} / 0.005

FV= $38,735.32