Question

Suppose a recent college graduate's first job allows her to deposit $200 at the end of each month in a savings plan that earns 12%, compounded monthly. This savings plan continues for 12 years before new obligations make it impossible to continue.
a) How much money has accrued in the account at the end of the 12 years?

Answer 1

Answer:

A = $63,812.31

At the end of the 12 years she would have accrued $63,812.31

Step-by-step explanation:

The future value of a contribution (at the end of every month) A is;

A = PMT{[(1+r/n)^(nt) - 1]/(r/n)}

Where;

A = future value

PMT = Monthly contribution = $200

r = rate = 12% = 0.12

t = time = 12 years

n = number of times interest is compounded per unit time = 12

Substituting the given values;

A = 200(((1+0.12/12)^(12×12) - 1)/(0.12/12))

A = $63,812.31

At the end of the 12 years she would have accrued $63,812.31