Question

Ms. Jones deposited $100 at the end of each month for 20 years into a savings account earning 2.1% interest compounded monthly. However, she withdrew $1000 at the end of the sixth year. How much money was in the account at the end of the twentieth year? The total amount of money in the savings account after the twentieth year is $_________Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

Answer 1

$28,453.02

Step-by-step explanation:

Using a financial calculator approach, we can determine the amount in the savings account at the end of year 6 as well as after 20 years as follows:

Balance after 6 years:

PMT=-100( monthly deposit)

I/Y=2.1%/12( monthly interest rate)

PV=0 (initial balance before 1st deposit is nil)

N=72 (number of monthly deposits in 6 years)

lastly CPT FV=$7,666.13

Balance after $1000 withdrawal=$7,666.13 -$1,000.00=$6,666.13

Balance after another 14 years(14+6=20)

PMT=-100

I/Y=2.1%/12( monthly interest rate)

PV=-6,666.13(balance after withdrawal in year 6)

N=168 (number of monthly deposits in 14 years)

lastly CPT FV=$28,453.02