Question

you plan to buy a house in 13yearw you want to save money for a down payment on the new hiuse .you are able to place $394 every month into a savings account at an annual rate of 13.46 percent compounded monthly how muxh money will be in the account after you made the last payment

Answer 1

Computation of Downpayment amount:

Given

Monthly Saving amount = $ 394

No.of Years = 13

Interest rate = 13.46% Compounded Monthly

Interest rate per month = 13.46% /12 = 1.121667%

No.of Payments in 13 Years = 13*12= 156

We know that

Future Value of the Ordinary Annuity = C [{ ( 1+i) ^n - 1} /i]

Here C = Cash Flow per period

I = Interest rate per period

n = No.of Payments

Future Value of the Ordinary Annuity = C [{ ( 1+i) ^n - 1} /i]

= $ 394[ { ( 1+0.011217)^156 -1} /0.011217]

= $ 394[ { ( 1.011217)^156 -1} /0.011217]

= $ 394[ { 5.697974-1} /0.011217]

= $ 394[ 4.697974/0.011217]

= $ 394* 418.8262

= $ 165017.52

Hence the total money in the account after the last payment is made is $ 165017.52

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