Question 1195118: You deposit $300 each month into an account earning 7% interest compounded monthly.
A) How much will you have in the account in 25 years?
B) How much total money will you put into the account?
c) How much total interest will you earn?
Found 2 solutions by Theo, ikleyn:
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! You deposit $300 at the end of each month into an account earning 7% interest compounded monthly.
A) How much will you have in the account in 25 years?
243,021.51
B) How much total money will you put into the account?
300 * 300 = 90,000
c) How much total interest will you earn?
243,021.51 minus 90,000 = 153,021.51.
number of months = 25 * 12 = 300
interest rate per month = 7%/12 = .58333333.....%
let me know if you have any questions.
theo
Answer by ikleyn(52812)  (Show Source):
You can put this solution on YOUR website! .
You deposit $300 each month into an account earning 7% interest compounded monthly.
A) How much will you have in the account in 25 years?
B) How much total money will you put into the account?
c) How much total interest will you earn?
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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 = 300; r = 0.07/12; n = 12*25 = 300. So, according to the formula (1),
you get at the end of the 20-th year
FV =  =  = $243,021.51 dollars.
Note that you deposit only 12*25*$300 = $90,000.
The rest, 243,021.51-90,000 = 153,021.51 dollars, 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.
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.
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