Recently, More Money 4U offered an annuity that pays 5.7 % compounded monthly. If $1,011 is deposited into this annuity every
month, how much is in the account after 6years? (Round to the nearest dollar) Part 2 of the question: How much of this is interest? (Round to the nearest dollar)
Part 1 The formula of the future value of annuity ordinary is Fv=pmt [(1+r/k)^(kn)-1)÷(r/k)] Fv future value? PMT monthly payment 1011 r interest rate 0.057 K compounded monthly 12 N time 6years Fv=1,011×(((1+0.057÷12)^(12 ×6)−1)÷(0.057÷12)) =86,546.05
Part 2 First find how many months in 6years 12×6=72 months
Interest=Fv-pmt×number of months Interest=86,546.05−1,011×72 Interest=13,754.05