Initial deposit = 1500
Monthly deposits = 250
Annual rate of interest = 6%
Calculate Future value after 2nd year.
Mothly interest rate = 0.06/12 = 0.005
Time period = 2*12 = 24
Future Value = 1500 (1 + 0.005) 24 + 250 [(1 + 0.005) 24 – 1 ÷ 0.005]
Future Value = 1690.73 + 6357.99
Future Value = 8048.72
Rounding off to nearest dollar, Future Value = $8,049
The deposit after two year will be $8,049
Alternatively, we can use the compound interest factors for the calculation of future value
FV = 1500 (F/P, 0.5%, 24) + 250 (F/A, 0.5%, 24)
FV = 1500 (1.1272) + 250 (25.4320)
FV = 8,048.8 or 8,049
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