Question

1. Tony has $500 in his investment account. He plans on depositing $50.00 per month, starting today. How much will he have in 5 years assuming the account earns 6% per year? (could you please show formulas)

a. $4,180

b. $4,163

c. $4,254

d. $4,051

e. $2,832

Answer 1

- Invested amount available in Tony's account = $500

Further, he will deposit annuity of $50 per month at the beginning of each month for 5 years.

To Calculate the Future Value at the end of Year 5 of Both the Invested amount and periodic annuity we will use Future Value of annuity due and Future Value formula respectively:-

Where, C= Periodic Payments = $50

r = Periodic Interest rate = 6%/12 = 0.5%

n= no of periods = 5 years*12 = 60

Invested amount = $500

Future Value = $3505.94 + $674.425

Future Value = $4180.37

So, amount available in 5 years is $4180

Option A

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