To find: the value of A’s investment after 25 years.
$42,211.46
Given information:
A contributes $50 per month into a Bond Fund that earns 7.26% annual interest.
Formula Used:
Future Value of an Annuity
The future value FV of an annuity consisting of n equal periodic payments of R dollars at an interest rate i per compounding period (payment interval) is:
Explanation:
The data given is:
Here, the interest is credited 12 times a year, so the interest rate is:
The number of payments is:
Substitute these values in the above formula,
The value of A’s investment after 25 years is $42,211.46.
Chapter 3 Solutions
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