You have decided to put $130 in a savings account at the end of each month. The savings account credits interest monthly, at the annual rate of 6%. How much money is in your account after 6 years?
Based on the information available in the question, we can use the following formula to calculate the money in our account after 6 years.
Since the interest is credited monthly, the monthly rate of interest is calculated as follows:-
Monthly rate of Interest = 6% per year /12 months = 0.5%
No. of periods = 6 years * 12 months = 72 periods.
Since the situation involves periodic deposits into the savings account and interest is accumulated on the depsoits, we can use the Future Value Interest Factor Annuity(FVIFA) table to find out the balance in account.
To find the money in our account after 6 years = $130 * FVIFA(0.5%, 72 periods) ;
=130 * 86.4089
The money in the account after 6 years = $11,233.16
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