Question

Joey has $10,000 to invest today and will invest an additional amount of $100 a month for the next 22 months. He expects his investment to earn a return of 7.2%, compounded monthly. How much will his investment be worth 2 years from now?

Answer 1

Step 1: Find the future value of $10,000.

Where,

FV = Future Value
PV = Present Value
i = rate of return
n = number of periods
a = number of compounding per year.

Therefore,

Step 2: Find the future value of $100 paid for next 22 months.

Where,
FVA = Future value of amount paid
A = Amount paid per month
i = rate of return
a = number of compounding per year
n = number of payments.

So the future value of 100 paid monthly for 22 months will be $ 2,344.31. Since 2 years has 24 months, we have to find the future value of  $2,344.31 after next 2 months.

Step 3: Find the future value of $ 2,344.31 after next 2 months.

Adding Step 1 and Step 3, we will get the answer: That is future value of $10,000 and future value of $100 paid monthly.

Future value = 11,543.87 + 2,372.52

=  $13,916.39