SOLUTION: Deposits of ​$250 per month are put into an investment plan that pays an APR of 4.2​%. How much money will be in the plan after 25 ​years?

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Question 1125488: Deposits of ​$250 per month are put into an investment plan that pays an APR of
4.2​%. How much money will be in the plan after 25 ​years?
Found 2 solutions by Boreal, ikleyn:
Answer by Boreal(15235)   (Show Source): You can put this solution on YOUR website!
FV=250[(1+.042/12)^300-1] divided by 0.042/12
=250*1.852/.0035 but don't round until the end
$132,315.51
Answer by ikleyn(52781)   (Show Source): You can put this solution on YOUR website!
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 = 250;  r = 0.042/12;  n = 12*25 = 300.  So, according to the formula (1), you get at the end of the 25-th year


    FV =  =  = $132,315.51.


Note that you deposit only  12*25*$250 = $75,000.  The rest is what the account earns/accumulates in 25 years.

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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.


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