If you put $700 at the beginning of the 2nd month, in a savings account with a 10% nominal rate of interest compounded monthly, what will the investment be worth in 12 month (value at the end of the first year, round to the nearest dollar)?
Solution:-
The formula for calculating future value is as follows:
FV = PV*(1+r)n
where,
FV= Future value
PV= Initial investment
r= rate of return per compounding period
n= no. of compounding periods
In the given question, we have the following information provided:
FV= ?
PV= $700
r (return per month)= 10%/12 = 0.83%
n= 11 (i.e. 11 months since investment is made in the second month)
Hence,
FV= 700*(1+0.83%)11
FV= $767
Therefore, the investment will be worth $767 in 12 months time.
If you put $700 at the beginning of the 2nd month, in a savings account with...
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