Question

Suppose you invest $50 a month in an annuity that earns 48% APR compounded monthly. How much money will you have in this account after 2 years?
A: 2001.29
B: 751.29
C: 1954.13
D: 1536.19
Solution:
use formula P[((1+(r/n)^(nt))-1)/(r/n)]
Solution 50[((1+(0.48/12)^(2 x 12))-1)/(0.48/12)]
= C $1954.13

Answer 1

C is the right answer

Answer 2

It is given that you have invested $50 a month in an annuity that earns 48% APR compounded monthly. We can conclude that after 2 years you will have $1954.13 in your account.

How to solve future value?

To solve this we are going to use the formula for the future value of an ordinary annuity:

$P[(\frac{(1+(r/n)^{nt}-1)}{(r/n)}]$

where

FV is the future value

P is the periodic payment

r is the interest rate in decimal form

n is the number of times the interest is compounded per year

t is the number of years

It is given that you have invested $50 a month in an annuity that earns 48% APR compounded monthly. we need to find how much money you have in this account after 2 years.

Since the interest is compounded monthly, it is compounded 12 times per year; therefore,

r = 48% = 0.48

n = 12

Let's put the values in our formula:

$P[(\frac{(1+(r/n)^{nt}-1)}{(r/n)}]\\\\50[(\frac{(1+(0.48/12)^{12\times 3}-1)}{(0.48/3)}]\\\\ 1954.13$

Thus, We can conclude that after 2 years you will have $1954.13 in your account.

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