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You set up a college fund in which you pay $2000 each year at the end of the year. How much money will you have accumulated iWhat is the effective annual rate (EAR) of 8% compounded monthly? (Enter your answers as a decimal rounded to 4 decimal place

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Answer #1

1.Future value of annuity=Annuity[(1+rate)^time period-1]/rate

=2000[(1.11)^8-1]/0.11

=2000*11.8594343

=$23718.87(Approx).

2.EAR=[(1+APR/m)^m]-1
where m=compounding periods

=[(1+0.08/12)^12]-1

=0.083(Approx).

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