Problem #1. You invested $150 at the end of every month for 10 years at 7% interest compounded monthly. Use formulas (not tables) to calculate (a) How much your investment is worth after 10 years. Show your work. (b) If you had invested the money at the beginning of each month rather than at the end, how much would be in your account? Show your work.
Problem #1. You invested $150 at the end of every month for 10 years at 7% interest compounded monthly. Use formulas (not tables) to calculate (a) How much your investment is worth after 10 years. Show your work. (b) If you had invested the money at the beginning of each month rather than at the end, how much would be in your account? Show your work.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:**Problem #1.** You invested $150 *at the end* of every month for 10 years at 7% interest compounded *monthly*. Use *formulas* (not tables) to calculate
(a) How much your investment is worth after 10 years. Show your work.
(b) If you had invested the money at the *beginning* of each month rather than at the end, how much would be in your account? Show your work.
Expert Solution
Information;
Monthly Investment (C) = $150
Monthly interest rate (r) = 0.00583333333333333 (i.e. 0.07 / 12)
Monthly period (n) = 120 (i.e. 10 years * 12)
Investment worth after 10 years = ?
Future value is the compounded value of each deposit made.
When payments are made at the end of each period, it is called ordinary annuity.
When payments are made at the beginning of each period, it is called annuity due.
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