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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.

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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