Question

you plan to save $500 monthly for 2 years earning 5%interest. how much will you end up with?

Answer 1

Monthly Saving = $500

Let us assume that saving is made at the start of each month

Annual Interest Rate = 5%

Monthly Interest Rate = Annual Interest Rate/12 = 5%/12 = 0.4167%

Investment Period = 2 years = 24 months

The future value of savings after 2 years can be calculated using the FV formula in spreadsheet

FV(rate, number of periods, payment amount, present value, when-due)

Where, rate = monthly interest rate = 0.4167%

number of periods = 24

payment amount = Monthly saving = $500

present value = present value of investments = 0

when-due = when is the saving made each month = beginning = 1

The future value of savings after 2 years = FV(0.4167%, 24, 500, 0, 1) = $12,645.48