Question

Jeremiah has a long term savings plan. For 10 years he has been investing $150 a month, earning 4.25% interest compounded monthly. how much more would he have saved if he had chosen to make deposits of $200 a month?

Answer 1

The formula of the future value of annuity ordinary
Fv=pmt [(1+r/k)^(kn)-1)÷(r/k)]
Fv future value
Pmt payment
R interest rate 0.0425
K compounded monthly 12
N time 10 years

If the payment 150
Fv=150×(((1+0.0425÷12)^(12
×10)−1)÷(0.0425÷12))
=22,381.089

If the payment 200
Fv=200×(((1+0.0425÷12)^(12
×10)−1)÷(0.0425÷12))
=29,841.452

How much more
29,841.45−22,381.09
=7,460.36