Bob's uncle is going to give him $400 a month for the next two years starting...
Bob's uncle is going to give him $400 a month for the next two years starting today for a total of 24 payments. If Bob deposits every payment in an account paying a nominal annual interest rate of 6% compounded monthly, how much will he have at the end of four years?
Homework Answers
Monthly payment = $400
Number of payments = 24
Annual interest rate = 6.00%
Monthly interest rate = 6.00% / 12
Monthly interest rate = 0.50%
Payments are made at the beginning of each month
Accumulated sum after 4 years = $400*1.005^48 + $400*1.005^47 +
… + $400*1.005^26 + $400*1.005^25
Accumulated sum after 4 years = $400 * 1.005^25 * (1.0025^24 - 1) /
0.0025
Accumulated sum after 4 years = $400 * 27.983243
Accumulated sum after 4 years = $11,193.30
So, he will have $11,193.30 at the end of four years.
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