Suppose you invest $130 a month for 5 years into an account earning 8% compounded monthly. After 5 years, you leave the money, w
ithout making additional deposits, in the account for another 25 years. How much will you have in the end?
1 answer:
Answer:
FV= $70,887.15
Step-by-step explanation:
<u>First, we need to calculate the future value of the $130 deposit for 5 years:</u>
FV= {A*[(1+i)^n-1]}/i
A= monthly deposit= $130
i= 0.08/12= 0.0067
n= 5*12= 60 months
FV= {130*[(1.0067^60) - 1]} / 0.0067
FV= $9,561.96
<u>Now, using the following formula, the future value of the investment after 25 years:</u>
<u />
FV= PV*(1 + i)^n
n= 25*12= 300
FV= 9,561.96*(1.0067^300)
FV= $70,887.15
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