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Suppose you deposit nothing at the beginning and instead you divide up the $600 into 12 envelopes each with $50. Find the balance after one year if you deposit one $50 envelope each month, all year, into an account that pays 5% APR with monthly compounding.

Respuesta :

Answer:

$3400.03

Explanation:

The balance one in one year would be the future value of the annuity

The formula for calculating future value of an annuity = A / [B / (r/m) ]

B = [(1 + r/m)^nm] - 1

FV = Future value  

P = Present value of annuity  = $50

R = interest rate  = 5%

N = number of years  = 1

m = number of compounding per year

[(1 + 0.004167)^60] - 1 = 0.283359

$50 x (0.283359 / 0.004167) = $3400.03

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