SOLUTION: To save for the replacement of a computer, a business deposits $250 at the end of each month into an account that earns 7% annual interest compounded monthly. Find the future value

Algebra.Com
Question 1178883: To save for the replacement of a computer, a business deposits $250 at the end of each month into an account that earns 7% annual interest compounded monthly. Find the future value of the ordinary annuity in 4 years. (Round you answer to the nearest cent.)
Found 2 solutions by Solver92311, ikleyn:
Answer by Solver92311(821)   (Show Source): You can put this solution on YOUR website!

The term is

So the fifth term is

Solve for

Then calculate

John

My calculator said it, I believe it, that settles it

From
I > Ø
Answer by ikleyn(52790)   (Show Source): You can put this solution on YOUR website!
.
To save for the replacement of a computer, a business deposits $250 at the end of each month into an account
that earns 7% annual interest compounded monthly. Find the future value of the ordinary annuity in 4 years.
~~~~~~~~~~~~~ 


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 the 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 = 250;  r = 0.07/12;  n = 12*4 = 48.  So, according to the formula (1), you get at the end of the 20-th year


    FV =  =  = $13,802.31.


Note that you deposit only  12*4*$250 = $12,000.  The rest is the interest that the account earns/accumulates in 4 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.



RELATED QUESTIONS

Maria has set a goal to save $ 10 000 in a savings account that earns 2.4% compounded... (answered by mananth)
how long will it take to save $20,000 by making deposits of $100 at the end of every... (answered by ikleyn)
1)Suppose you invest $150 at the end of each month for 6 years into an account earning 6% (answered by ikleyn)
dusty hill deposit 250 at the end of every month into an account that earn 7.8% interest, (answered by ikleyn)
Bob is saving money that he earns at his part time job. He deposits $100 at the end of... (answered by Olasko,ikleyn)
A company wants to set up a sinking fund for the repayment of a loan of 100million at the (answered by Theo)
How long will it take to save ​$12500 by making deposits of ​$90 at the end of every... (answered by Theo)
nikki deposits $200 at the end of every month in an account that pays 3.5%/a compounded... (answered by mathmate)
4. You are planning to deposit $15,000 into a bank account at the end of each year for 5... (answered by Theo)