Question

you pkan to deposit $4,509 oer month (at the end of each month) in your kids college fund for 12 consecutive years. Assuming an annual rate of 6.5% how much shoukd you expect to have on the account at the end of year 12?

Answer 1

FV of annuity
P = PMT x ((((1 + r) ^ n) - 1) / i)
Where:
P = the future value of an annuity stream	A
PMT = the dollar amount of each annuity payment	$ 54,108.00	4509*12
r = the effective interest rate (also known as the discount rate)	6.70%	=((1+6.5%/12)^12)-1
i=nominal Interest rate	6.50%
n = the number of periods in which payments will be made	12
FV of fund after 12 years=	54108* ((((1 + 6.7%) ^ 12) - 1) / 6.5%)
FV of fund after 12 years=	$979,675.54