Question

You want to buy a house in 10 years and figure you can put $185 a month into an account that earns 3.250%, compounded monthly, to save up for a down-payment. At the end of 10 years how much money will you have saved?Answer in $, to two decimal places i.e. $x,xxx.xx

Answer 1

- Periodic monthly saving for 10 years = $185

Calculating the Future Value of monthly saving at the end of 10 years:-

Where, C= Periodic Savings = $185

r = Periodic Interest rate = 3.250%/12 = 0.2708333%

n= no of periods = 10 years*12 = 120

Future value = $26,190.72

So, the money will you have saved at the end of year 10 is $26,190.72

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