Question

You plan to buy a house in 6 years. You want to save money for a...

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?

Homework Answers

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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