Bob is planning a college fund for his oldest child. He intends to deposit $50 at...
Bob is planning a college fund for his oldest child. He intends to deposit $50 at the end of each month in a money market fund for the next 16 years. The account pays 6.5% annually. What will the balance be at the end of the 16th year?
Homework Answers
| Future value of investments at the end of 16 years | = | Annuity | * | Future value of annuity of 1 | |||
| = | $ 50 | * | 336.2378 | ||||
| = | $ 16,811.89 | ||||||
| Working: | |||||||
| Future value of annuity of 1 | = | (((1+i)^n)-1)/i | Where, | ||||
| = | 336.237756 | i | 6.5%/12 | = | 0.005417 | ||
| n | 16*12 | = | 192 | ||||
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