SOLUTION: You decide to contribute to a mutual fund that averages 8% return per year. If you contribute $125 monthly, - How much will be in the account after 10 years?

Question 1095683: You decide to contribute to a mutual fund that averages 8% return per year. If you contribute $125 monthly,
- How much will be in the account after 10 years?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
your interest rate is 8% per year.
monthly compounding is assumed.
your monthly interest rate is 8/12 = .666667% per month rounded to 6 decimal places.
your number of months are 10 * 12 = 120 months.
you can use the following calculator to figure out what the future value of your investment is.
https://arachnoid.com/finance/
your results are shown below:
$$$

your inputs are:
present value = 0
future value = 0 or just leave it alone.
number of periods = 120 which is 10 years * 12 months per year.
payment amount = -125 dollars.
it is negative because this is money you are sending out to make your monthly payments.
payment at is set to end of month.
you will make you payment at the end of each month.

you will click on FV and it will tell you that the future value is $22,868.26

that's how much money you will have in the account at the end of 10 years.

your total payments are 125 * 120 = $15,625.
the difference is interest earned.

the calculations are made as follows:

at the beginning of the first month, you have $0 in the account.
at the end of the first month, you have $125 in the account.
at the end of the second month, you have $250.83 in the account.
this is equal to the $125 from the previous month * 1.00666667 + the 125 you are adding in the present month.
at the end of the third month, you have 377.51 in the account.
this is equal to $250.85 from the previous month * 1.00666667 + the 125 you are adding in the present month.
you can follow the calculations from the attached spreadsheet printout.
$$$

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