Question

Jennifer has		$7,000	invested in a money market account
that pays 1.5% interest compounded monthly at the end of
each month. She makes deposits at the end of each month
of	$150	. How much will she have in the account
after 3 years?

Answer 1

In order to calculate how much will Jennifer have after 3 years,

we will first calculate the future value of $7,000 after 3 years

P(1+r/n)^n*t

where P = Principal amount, r= rate of interest, n= number of installments, t= number of years

7000*(1+ 0.015/12)^12*3

=$7000(1.00125)³⁶

=$7000*1.046

=$7322.

Now we will calculate future value of the payments

d*[(1+i)^n*t -1/i *(1+i),

where d = monthly deposit, i = rate/number of instalments in a year

$150*[(1+0.00125)³⁶-1/0.00125*(1+.00125)]

$150*(1.046-1)/0.00125*1.00125

$5520*1.00125

$5526.90

The total value Jennifer will have after 3 years is the total of $7322+$5526.90 = $12848.90