Suppose you have $600 to invest in a savings plan, and you want to compare 4 dif

Question

Suppose you have $600 to invest in a savings plan, and you want to compare 4 different ways you could invest the money Find the balance after one year if you deposit all the money into an account that pays $2.50 interest each month (this is a simple interest equations where the amount of interest stays the same each month) Number Find the balance after one year if you deposit all the money into an account that pays 5% APR with monthly compounding Number Find the balance after one year if you deposit $50 per month into the account that pays 5% APR with monthly compounding. Number Find the balance after one year if you deposit $300 into the account that pays 5% APR at the beginning of the year and then make monthly deposits of $25. Number

Explanation / Answer

(a) Balance after one year = 600 + 2.5 * 12 = $ 630

(b) Balance after one year = 600 * [1 + 5/1200]12 = $ 630.70

(c) Balance after on year = 50 * [(1 + 5/1200)12 -1]/(5/1200) = $ 613.94

(d) Balance after one year = 300 * [1 + 5/1200]12 + 25 * [ [(1 + 5/1200)12 -1]/(5/12)] = $ 315.35 + $ 306.97 = $ 622.32

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