Lauren plans to deposit $8000 into a bank account at the beginning of next month and $250/month into the same account at the end of that month and at the end of each subsequent month for the next 4 years. If her bank pays interest at a rate of 5%/year compounded monthly, how much will Lauren have in her account at the end of 4 years?
| EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100 |
| ? = ((1+5/(12*100))^12-1)*100 |
| Effective Annual Rate% = 5.1162 |
| Future value = present value*(1+ rate)^time |
| Future value = 8000*(1+0.051162)^4 |
| Future value = 9767.17 |
| FVOrdinary Annuity = C*(((1 + i )^n -1)/i) |
| C = Cash flow per period |
| i = interest rate |
| n = number of payments |
| FV= 250*(((1+ 5/1200)^(4*12)-1)/(5/1200)) |
| FV = 13253.72 |
total FV =9767.17+13253.72
=
| 23020.89 |
Lauren plans to deposit $8000 into a bank account at the beginning of next month and...
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