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Question

Jason intends to save for a house by making monthly deposits into a term savings account that earns interest at

the rate 3.2%, with interest compounded monthly. His budget allows him to save the monthly amount $1100 starting at the end of this month.

a) What will his savings be if he follows his plan for 5 years?

b) If he receives an unexpected inheritance of $50,000 today which he deposits to start off his home savings, what will his total savings be at the end of the five years.

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Future Value of Annuity-page0001.jpg

SOLUTION
a) Since deposits are at the end of each month, it is the case of regular annuity. In case of
regular annuity formula for calculating future value is:
FV = P-
(1+ i)n - 1
Where FV = Future...

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