Question

Suppose a recent college graduate's first job allows her to deposit $150 at the end of each month in a savings plan that earns 6%, compounded monthly. This savings plan continues for 6 years before new obligations make it impossible to continue. If the accrued amount remains in the plan for the next 15 years without deposits or withdrawals, how much money will be in the account 21 years after the plan began? (Round your answer to the nearest cent.)

Answer 1

First, let's find the future value after all the monthly payments are made

n = 6 * 12 = 72 monthly payments

r = 0.06/12 = 0.005 monthly rate

Now with this as the PV, lets find the future value after 15 years

FV21 = PV * (1 + r)^15

FV21 = 12,961.328355 * (1 + 0.06)^15

FV21 = $31,062.5776626306

The amount of money in the account after 21 years of the plan began = $31,062.5776626306