Question

You deposit $200 every quarter for 12 years into a sinking fund that pays 2.25% interest compounded annually. What is the future value of your fund?

Answer 1

The  future value of your fund if compounded annually is $261.21

Compound interest

The formula for calculating the compound interest is expressed as

P(t) = P0(1+r)^t

where

P0 = $200

rate r = 2.25% = 0.0225

time t = 12 years

Substitute

p(12) = 200(1+0.0225)^12

P(12) = 200(1.0225)^12

P(12) = 261.21

Hence the  future value of your fund if compounded annually is $261.21

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