Question

You deposit $400 each month into an account earning 8% interest compounded monthly. Round to the nearest cent as needed. a) How much will you have in the account in 35 years? $ b) How much total money will you put into the account? $ c) How much total interest will you earn? $

Answer 1

If I deposit $400 each month into an account earning 8% interest compounded monthly, I will have $6,517 in my account in 35 years. The total money that I will put into the account is $168,000. I will earn a total compound interest of $6,117.

• Calculating the Sum of Money in 35 years

Given information is as follows,

Principal, P = $400

Rate = 8%

Time, T = 35 years

n = 12 (Compounded monthly)

The amount for compound interest is given as,

A = $P\frac{(1+\frac{R}{n} )^{nT} -1}{R/n}$

A = $400\frac{(1+\frac{0.08}{12} )^{12.35} -1}{0.08/12}$

A = 6,517.02

A = $6,517 (to the nearest cents)

• Calculating the Amount Put in Account

Since, $400 is deposited every month for 35 years,

Amount Put in 35 years for this compound interest =$400 × 12 × 35

= $168,000

• Calculating the Compound Interest

A = P + CI

Thus, the compound interest is given by,

CI = A - P

CI = 6517 - 400

CI = $6,117

I will earn a total interest of $6,117

Learn more about compound interest here:

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