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Anjo wants to buy a quality television set within a year. He decides to
make regular deposits ₱2,500 monthly where the money will earn 5%
compounded monthly. How much will he have in his savings one year after?
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It is about calculating future value of an Ordinary Annuity saving plan. The general formula is
FV = , (1)
where FV is the future value of the account; P is the monthly payment (deposit); 1+r is the monthly growth coefficient;
n is the number of deposits.
Under the given conditions, P = 2500; r = 0.05/12; n = 12. So, according to the formula (1), Anjo gets at the end of the year
FV = = P30697.14.
Note that Anjo deposits only 12*P2500 = P30,000. The rest is what the account earns/accumulates in 12 months.
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On Ordinary Annuity saving plans, see the lessons
- Ordinary Annuity saving plans and geometric progressions
- Solved problems on Ordinary Annuity saving plans
in this site.
The lessons contain EVERYTHING you need to know about this subject, in clear and compact form.
When you learn from these lessons, you will be able to do similar calculations in semi-automatic mode.