Question

1) You plan to deposit $1,000 every month into an account paying 6% compounded monthly for the next 5 years. How much will you accumulate over this five year period?

2) What is the future value interest factor of an annuity for #1?

3) If you plan to make annual payments instead of the monthly payments indicated in #1 above, how much will you have to deposit annually to have the same sum accumulated in five years as in #1 above? Interest rate remains 6% compounded monthly.

Please explain how to solve these. I am very confused.

Answer 1

Ans 1) $ 69770.03

P =	Periodic payments
r =	rate of interest
n =	no of years

Future Value of Annuity =	P ( (1 + r)n - 1 ) / r
	1000* ((1 + 6%/12)^60 - 1) / (6%/12)
	69770.03

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