Calculate the future value of end-of-month payments of $3,000 made for 6 years into an investment fund that earns 6.50% compounded quarterly.
Quarterly rate = 6.5%/4 =1.625% | ||||
Let us assume monthly effective rate r | ||||
equation would be | ||||
1.625% =(1+r)^3 -1 | ||||
r =0.5387918% | ||||
Future Value of an Ordinary Annuity | ||||
= C*[(1+i)^n-1]/i | ||||
Where, | ||||
C= Cash Flow per period | ||||
i = interest rate per period =0.5387918% | ||||
n=number of period =6*12 =72 | ||||
= $3000[ (1+0.005387918)^72 -1] /0.005387918 | ||||
= $3000[ (1.005387918)^72 -1] /0.005387918 | ||||
= $3000[ (1.4724 -1] /0.005387918] | ||||
= $2,63,028.89 |
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