SOLUTION: Bob is saving money that he earns at his part time job. He deposits $100 at the end of each month into a saving account that pays interest at 3% , compounded monthly. Bob would lik
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Question 1133060: Bob is saving money that he earns at his part time job. He deposits $100 at the end of each month into a saving account that pays interest at 3% , compounded monthly. Bob would like to know what his savings will be in the end of 1 year.
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Bob is saving money that he earns at his part time job. He deposits $100 at the end of each month into a saving account
that pays interest at 3% , compounded monthly. Bob would like to know what his savings will be in the end of 1 year.
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Pay attention on how I edited your post to make it precisely correct.
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 = 100; r = 0.03/12; n = 12*1 = 12. So, according to the formula (1), you get at the end of the 1-th year
FV = = = $1216.64.
Note that you deposit only 12*1*$100 = $1200. The rest is what the account earns/accumulates in 1 year.
