Question

When you start your career, you decide to set aside $250 every month to deposit into an investment account. The investment firm claims that historically their accounts have earned an annual interest rate of 9.0% compounded monthly. Assuming this to be true, how much money will your account be worth after 20 years of depositing and investing? Round your answer to the nearest cent. Do not include labels or units. Just enter the numerical value.

Answer 1

After 20 years of depositing and investing there will be 168474.01 dollars in your account.

What is compound interest?

It is defined as the interest on the principal value or deposit and the interest which is gained on the principal value in the previous year.

We can calculate the compound interest using the below formula:

$\rm A = P(1+\dfrac{r}{n})^{nt}$

Where A = Final amount

          P = Principal amount

          r  = annual rate of interest

          n = how many times interest is compounded per year

          t = How long the money is deposited or borrowed (in years)

The formula for calculating how much money will your account be worth after 20 years of depositing and investing is:

P = $250, r = 9% = 0.09, t = 20 years, n = 12 and PMD = $250(per month deposit)

$\rm A = P(1+\dfrac{r}{n})^{nt}+\dfrac{PMD((1+\dfrac{r}{n})^{nt}-1)}{\dfrac{r}{n}}$

$\rm A = 250(1+\dfrac{0.09}{12})^{12\times20}+\dfrac{250((1+\dfrac{0.09}{12})^{12\times12}-1)}{\dfrac{0.09}{12}}$

A = 1502.287 + 166971.717

A = $168474.01

Thus, after 20 years of depositing and investing there will be 168474.01 dollars in your account.

Learn more about the compound interest here:

brainly.com/question/26457073

#SPJ1