SOLUTION: dusty hill deposit 250 at the end of every month into an account that earn 7.8% interest, compounded monthly. how mush will he save up after 10 years

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Question 1149615: dusty hill deposit 250 at the end of every month into an account that earn 7.8% interest, compounded monthly. how mush will he save up after 10 years
Answer by ikleyn(52814) About Me  (Show Source):
You can put this solution on YOUR website!
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It is a classic Ordinary Annuity saving plan. The general formula is 


    FV = P%2A%28%28%281%2Br%29%5En-1%29%2Fr%29,    (1)


where  FV is the future value of the account;  P is the monthly payment (deposit) value; 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 = 0.078/12;  n = 12*10 = 120.  So, according to the formula (1), you get 
at the end of the 10-th year


    FV = 250%2A%28%28%281%2B0.078%2F12%29%5E%2812%2A10%29-1%29%2F%28%280.078%2F12%29%29%29 = 250%2A%28%28%281%2B0.078%2F12%29%5E120-1%29%2F%28%280.078%2F12%29%29%29 = 45229.73     ANSWER

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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.

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.