Answer to Question #175770 in Financial Math for Yanko Pena

Question

Lauren plans to deposit $6000 into a bank account at the beginning of next month and $250/month into the same account at the end of that month and at the end of each subsequent month for the next 5 years. If her bank pays interest at a rate of 4%/year compounded monthly, how much will Lauren have in her account at the end of 5 years? (Assume she makes no withdrawals during the 5-year period. Round your answer to the nearest cent.)

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Answer 1

$FV=PV(1+r/n)^{nt-1}+A[(1+r/n)^{nt}-1]\div r/n$

$r=4\%, t=5yrs, n=12, A=250, PV=6000$

$FV=6000(1+0.04/12)^{(12)(5)-1}+250[(1+0.04/12)^{(12)(5)}-1]\div 0.04/12$

$6000\times1.2169+250\times 66.03=7301.4+16507.5=\$23,808.9$