Suppose you currently have $5,000 in your Savings Account and plan to save $670
ID: 2651796 • Letter: S
Question
Suppose you currently have $5,000 in your Savings Account and plan to save $670 a month for the first 5 years (saved dollars are available at the end of each month) and $12,225 a year (saved dollars are available at the end of each year) for the next 5 years. Your monthly savings of $670 are deposited into Account # 2 which earns you an interest of 8.25% for the first 5 years. The balance at the end of the first 5 years earns 8.39% compounded monthly for the next 5 years. How much will you have in Account #2 10 years from now?
$49,551.62
$3,950.26
$5,909.79
$75, 268.01
Suppose you currently have $5,000 in your Savings Account and plan to save $670 a month for the first 5 years (saved dollars are available at the end of each month) and $12,225 a year (saved dollars are available at the end of each year) for the next 5 years. Your monthly savings of $670 are deposited into Account # 2 which earns you an interest of 8.25% for the first 5 years. The balance at the end of the first 5 years earns 8.39% compounded monthly for the next 5 years. How much will you have in Account #2 10 years from now?
$49,551.62
$3,950.26
$5,909.79
$75, 268.01
Explanation / Answer
1)
Future value of a series:
PMT * (((1 + r/n)^nt - 1) / (r/n))
=670* (((1 + 0.0825/12)^(12*5) - 1)/(0.0825/12))
= 49,552
Compound interest for principal
P(1+r/n)^nt
= 49552*(1+0.0839/12)^(12*5)
= 75268.59
2)
Year
Amount
8.25% interest
Cumulative amount
1.0
5,000.0
412.5
5,412.5
2.0
5,412.5
446.5
5,859.0
3.0
5,859.0
483.4
6,342.4
4.0
6,342.4
523.2
6,865.6
5.0
6,865.6
566.4
7,432.1
6.0
7,432.1
613.1
8,045.2
7.0
8,045.2
663.7
8,708.9
8.0
8,708.9
718.5
9,427.4
9.0
9,427.4
777.8
10,205.2
10.0
10,205.2
841.9
11,047.1
Year
Amount
8.25% interest
Cumulative amount
1.0
5,000.0
412.5
5,412.5
2.0
5,412.5
446.5
5,859.0
3.0
5,859.0
483.4
6,342.4
4.0
6,342.4
523.2
6,865.6
5.0
6,865.6
566.4
7,432.1
6.0
7,432.1
613.1
8,045.2
7.0
8,045.2
663.7
8,708.9
8.0
8,708.9
718.5
9,427.4
9.0
9,427.4
777.8
10,205.2
10.0
10,205.2
841.9
11,047.1
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