Question

Joseph deposits $350. Into a retirement fund every month at 3% nominal interest, compounded monthly, for 8 years.

How much will he have in the fund when he is finished making deposits?

Answer 1

Ans. Deposit amount every month, A = $350

Monthly interest, r = 3% or 0.03

Number of months, n = 8*12 = 96 months

Future value of cashflows,

FV = 350*(1+0.03)^95 + 350*(1*0.03)^94 + 350*(1+0.03)^93+.......+ 350

Using sum of geometric progression with first term 350*(1+0.03)^95 and common ratio 1/(1+0.03)

FV = 350[((1+ 0.03)^96 - 1)/0.03] = $187547.565

After he finishing making deposits, he will have $187547.565.

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