2.) If you initial deposit $1500, and $250 is deposited at the end of each month....

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2.) If you initial deposit $1500, and $250 is deposited at the end of each month. The interest is at an annual nominal rate o

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Answer 1

Answer #1

Initial deposit = 1500

Monthly deposits = 250

Annual rate of interest = 6%

Calculate Future value after 2^nd 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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Answer 2

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