.
You put $159 per month in an investment plan that pays an APR of 5%.
How much money will you have after 24 years?
Compare this amount to the total amount of deposits made over the time period.
~~~~~~~~~~~~~~~~
This problem is posed in a strange way, unprofessionally.
To be professional, the problem should say whether the regular monthly payments
are made: at the beginning of each month or at the end of each month.
Computational procedures are different in these cases, and the answers are different, too.
In my solution, I will assume that the regular monthly payments of $159
are made at the end of each month (ordinary annuity).
Then it is a classic Ordinary Annuity saving plan. The general formula is
FV = , (1)
where FV is the future value of the account; P is your monthly payment (deposit);
r is the monthly percentage yield presented as a decimal;
n is the number of deposits (= the number of years multiplied by 12, in this case).
Under the given conditions, P = 159; r = 0.05/12; n = 12*24 = 288.
So, according to the formula (1), you get at the end of the 24-th year
FV = = $88,220.19.
Note that you the deposited amount is only 12*24*159 = $45,792. The rest is what the account earns/accumulates in 24 years.
-----------------
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.