Question

P5-7 (similar to) :Question Help Future value with periodic rates. Matt Johnson delivers newspapers and is putting away $20 at the end of each month from his paper route collections. Matt is 13 years old and will use the money when he goes to college in 5 years. What will be the value of Matt's account in 5 years with his monthly payments if he is earning 6.5% (APR), 8% (APR), or 14% (APR)? What will be the value of Matt's account in 5 years with his monthly payments if he is earning 6.5% (APR)? $ (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer.

Answer 1

a)	5 years ,6.5% APR
	Future Value of an Ordinary Annuity
	= C*[(1+i)^n-1]/i]
	Where,
	C= Cash Flow per period
	i = interest rate per period
	n=number of period
	= $20[ (1+0.005416667)^60 -1 /0.005416667]
	= $20[ (1.005416667)^60 -1 /0.005416667]
	= $20[ (1.3828 -1] /0.005416667]
	= $1,413.48
b)	5 years ,8% APR
	Future Value of an Ordinary Annuity
	= C*[(1+i)^n-1]/i]
	Where,
	C= Cash Flow per period
	i = interest rate per period
	n=number of period
	= $20[ (1+0.0066667)^60 -1 /0.0066667]
	= $20[ (1.0066667)^60 -1 /0.0066667]
	= $20[ (1.4898 -1] /0.0066667]
	= $1,469.54
c)	Future Value of an Ordinary Annuity
	= C*[(1+i)^n-1]/i]
	Where,
	C= Cash Flow per period
	i = interest rate per period
	n=number of period
	= $20[ (1+0.0116667)^60 -1 /0.0116667]
	= $20[ (1.0116667)^60 -1 /0.0116667]
	= $20[ (2.0056 -1] /0.0116667]
	= $1,723.90