Question

If Jackson deposits $100 at the end of each month in a savings account earning interest at a rate of 3%/year compounded monthly, how much will he have on deposit in his savings account at the end of 6 years, assuming he makes no withdrawals during that period? (Round your answer to the nearest cent.)

Answer 1

Interest rate per month = 3%/12 = 0.25%

Number of monthly periods = 6*12 = 72 periods

Value at the end of 6 years = future value of annuity

= periodic amount*[{(1+r)^n - 1}/r]

= 100*[{(1+0.25%)^72 - 1}/0.0025]

= $7877.94

i.e. $7,877.94