Please show steps and equation answering the question A person deposited $50 eve
ID: 2806630 • Letter: P
Question
Please show steps and equation answering the questionA person deposited $50 every month into an account which earned 6% compounded monthly. The first payment was made on February l , 1998, and the last payment was made on November l , 2001 a) How much was in the account on November l , 2001? b) What single amount deposited on February I , 1998: is equivalent to the monthly payments of $50.00?
Please show steps and equation answering the question
A person deposited $50 every month into an account which earned 6% compounded monthly. The first payment was made on February l , 1998, and the last payment was made on November l , 2001 a) How much was in the account on November l , 2001? b) What single amount deposited on February I , 1998: is equivalent to the monthly payments of $50.00?
Please show steps and equation answering the question
A person deposited $50 every month into an account which earned 6% compounded monthly. The first payment was made on February l , 1998, and the last payment was made on November l , 2001 a) How much was in the account on November l , 2001? b) What single amount deposited on February I , 1998: is equivalent to the monthly payments of $50.00?
Explanation / Answer
Period = 45 months (From February 1, 1998 to November 1, 2001 Future value of annuity = P*Future Value of annuity of $ 1 = $ 50 x 50.5758 = $ 2,529 future Value of annuity due of $ 1 = ((((1+i)^n)-1)/i)*(1+i) Where, = ((((1+0.005)^45)-1)/0.005)*(1.005) i = 6%/12 = 0.005 = 50.5758 n = 45 Present value of above amount as of February 1, 1998 = P*(1+i)^-n Where, = 2529*(1.005^-45) i = 0.005 = $ 2,021 n = 45 So, a) Amount as of November 1, 2001 $ 2,529 b) Single amount deposited as of February 1, 1998 $ 2,021