Question

You have decided to place $644 in equal deposits every month at the beginning of the month into a savings account earning 5.88 percent per year, compounded monthly for the next 6 years. The first deposit is made today. How much money will be in the account at the end of that time period?

*Round the answer to two decimal places.*

Answer #1

Answer : **Calculation of Future Value of Annuity
:**

Future Value of Annuity = Periodic Payment * {[(1 + r)n - 1 ] / r } * (1 + r)

where periodic payment = 644

r is monthly rate of interest i.e 5.88%/ 12 = 0.49% or 0.0049

n is the number of payments i.e 6 * 12 = 72

**Future Value of Annuity** = 644 * {[(1 +
0.0049)72 - 1 ] / 0.0049 } * (1 + 0.0049)

= 644 * {[1.421821 - 1 ] / 0.0049 } * 1.0049

= 644 * {0.421821 / 0.0049 } * 1.0049

= 644 * 86.08592 * 1.0049

= **55,710.99**

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