SOLUTION: Suppose you invest $130 at the end of each month for 4 years into an account earning 7% annual interest compounded monthly. After 4 years, you leave the money, without making addit

Question 1202515: Suppose you invest $130 at the end of each month for 4 years into an account earning 7% annual interest compounded monthly. After 4 years, you leave the money, without making additional deposits, in the account for another 24 years. How much will you have in the end?
Answer by math_tutor2020(3817) (Show Source): You can put this solution on YOUR website!

Let's see how much money would be in the account after the 4 year period.

FV = unknown future value
P = monthly payment = 130
r = annual interest rate in decimal form
r = 0.07
i = monthly interest rate in decimal form
i = r/12 = 0.07/12 = 0.0058333333 approximately
n = number of months = 4*12 = 48

Future value of annuity formula

You will have $7177.20 in the account after 4 years.

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That amount is then the starting point and deposit amount for the compound interest formula.
This is when the money will sit for another 24 years without further deposits.

P = 7177.20 = deposit amount
r = 0.07
n = compounding frequency this time (not number of months)
n = 12 since we're compounding monthly
t = 24 years

Answer: $38,322.16

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