Question

You plan to invest $100 per month for the next 10 years into an account that pays 8% with daily compounding. How much will you have in the account in 10 years?

Answer 1

FV= $18,213.18

Explanation:

First, we need to calculate the monthly real interest rate:

Daily interest rate= 0.08/360= 0.00022

Monthly interest rate= (1.00022^30) - 1

Monthly interest rate= 0.0066

Assuming a year of 360 days, and months of 30 days.

Now, we can determine the future value of the investment:

Monthly deposit= $100

Number of periods= 10*12= 120

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

A= monthly deposit

FV= {100*[(1.0066^120) - 1]} / 0.0066

FV= $18,213.18