Question

You plan to buy a house in 6 years. You want to save money for a down payment on the new house. You are able to place $401 every month at the end of the month into a savings account at an annual rate of 14.64 percent, compounded monthly. How much money will be in the amount after you made the last payment?

Answer #1

This question is based on the concept of future value of annuity. | ||||||||||

Annuity is fixed amount paid after a regular interval of time. | ||||||||||

Future Value of $ 1 | = | (((1+i)^n)-1)/i | Where, | |||||||

= | (((1+0.0122)^72)-1)/0.0122 | i | = | 0.1464/12 | = | 0.0122 | ||||

= | $ 114.29 | n | = | 6*12 | = | 72 | ||||

Future Value of annuity of $ 401 | = | $ 401 | * | $ 114.29 | ||||||

= | $45,828.57 | |||||||||

Thus, after last
payment amount will become $ 45,828.57 |
||||||||||

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