Question

What is the future value of a $400/month deposit at the end of 3 years? Your first deposit occurs now (at time 0) and your last deposit is at the end of period 36. The interest rate is 12% annual rate compounded monthly. Note: Since the interest is compounded monthly, you’ll want to use months as the time period for the problem. The applicable interest rate for each month would therefore be 1%.

Answer 1

Answer:

FV $279.5700

Explanation:

We are asked for the future value of a 400 dollar annuity-due for 36 months  at 1% interest rate

$C \times \frac{(1+r)^{time} -1}{rate}(1+r) = FV$

C 400

time 36 ( 3 years x 12 months)

rate 0.01 ( 12% annual / 12 months = 1%)

$400 \times \frac{1-(1+0.01)^{-36} }{0.01}(1+.01) = PV$

FV $279.5700