Question

Joe wants to be able to purchase a dream car on January 1,2004, just after he graduates from college. Joe has had a part time job and started making deposits of $475 each month into an account that pays 18% compounded monthly beginning with the first deposit on February 1, 1999. The last deposit is to be made on January 1, 2004. Determine how much money he would have saved to buy the car.

Answer 1

Answer:

The money he would have saved to buy the car is $ 45701.96

Explanation:

Joe started making the deposits of $ 475 each month. This deposits pays 18% compounded interest monthly begining on february 1, 1999 with the first deposit.. Rememberd that the last deposit is to be made on  january 1, 2004.

The total number of periods then is 60 and the interest rate will be of 1,5%=18%/12.

You will have to calculate the future value to know how much money he would have saved to buy the car.

F= 475(1+0,015)∧60-1

            0,015

F= 475(1,015)∧60-1

               0,015

F= 475(2.4432-1)

              0,015

F= 475 × 1.4433

              0,015

F= 475(96.21)

F= $45701.96