.
There are two types of saving accounts that work in accordance with this scheme:
a) Ordinary Annuity saving plan, and
b) Annuity Due saving plan.
Under Ordinary Annuity saving plan you deposit $400 at the end of each month;
under Annuity Due saving plan you deposit $400 at the beginning of each month.
I will give you the solution for the Ordinary Annuity plan only.
(When such a problem comes without explicit naming of the plan, I am 100% sure that it means an Ordinary Annuity).
The formula is
The future value in 20 years = = = $117918.73.
Notice that you deposit only $400*12*20 = $96,000.
The rest is compound percents that the account earns in 20 years.
a) How much will you have in the account in 20 years?
$ $117,918.73.
b) How much total money will you put into the account?
$ $96,000.
c) How much total interest will you earn?
= 22.83%.
On both plans, you can learn and read from the lessons
- Ordinary Annuity saving plans and geometric progressions
- Annuity Due saving plans and geometric progressions
in this site.