Question

8. Patricia Rodríguez has just deposited $ 40,000 of an inheritance in an account that pays the 6 percent interest computed monthly. She plans to contribute an additional $ 5,000 within one year and another $ 10,000 within two years. How much will Patricia have in the account in four years?

Answer 1

We use the formula:
A=P(1+r/12)^12n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=$40,000*(1+0.06/12)^(12*4)+5000*(1+0.06/12)^(12*3)+$10,000*(1+0.06/12)^(12*2)

=(40000*1.270489161)+(5000*1.196680525)+(10000*1.127159776)

=$68074.57(Approx).