Question

You plan to make monthly deposits of $1,000 into an account at the beginning of each month for the next 12 years. If you can earn 3.0% interest, what will your final balance be by the end of 12 years? Round to the nearest cent. ​[Hint: Beginning of period monthly cash flows!]

Answer 1

Number of periods = 12 * 12 = 144

Monthly rate = 3% / 12 = 0.25%

Future value = (1 + r) * Annuity * [(1 + r)^n - 1] / r

Future value = (1 + 0.0025) * 1000 * [(1 + 0.0025)^144 - 1] / 0.0025

Future value = 1.0025 * 1000 * [1.432686 - 1] / 0.0025

Future value = 1.0025 * 1000 * 173.074254

Future value = $173,506.94

Balance will be $173,506.94