Question

A savings plan requires 48 deposits of $594 per month commencing today. If the interest rate is 6.6% p.a compounding monthly, the value of the investment plan in exactly 4 years from today will be closest to

Answer 1

Information provided:

Monthly deposit= $594

Time= 4 years*12= 48

Interest rate= 6.6%/4= 1.65% per quarter

The question is concerning finding the future value of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

It is solved using a financial calculator by inputting the below into the calculator in BGN mode:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2ndBGN 2ndSET on the Texas BA II Plus calculator.

Enter the below in a financial calculator to compute the future value annuity due.

PMT= -594

N= 48

I/Y= 1.65

Press the CPT key and FV to compute the future value of annuity due.

The value obtained is 42,969.04.

Therefore, the value of the investment plan will be $42,969.04 in exactly 48 months from today.