Question

Your uncle deposits $399 per month for 8 months in an account paying interest of 2.16% per year compounded monthly. The payments begin one month from today. At the end of 28 months the balance in your account is?

Answer 1

- periodic monthly deposit for 8 months starting with one month from today = $399

- After month end 8 till month end 28 only Interest will be compunded,ie., Interest will be comp[ounded for 20 months

Calculating Future Value at the end of 28 months:-

Where, C= Periodic Payments = $399

r = Periodic Interest rate = 2.16%/12 = 0.18%

n= no of periods of periodic deposit = 8 months

m = no of period of interest compounding = 20 months

Future Value = $3329.82

So, balance At the end of 28 months is $3,329.82

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