You plan to buy a house in 6 years You want to save money fo

You plan to buy a house in 6 years. You want to save money for a down payment on the new house. You are able to place $401 every month at the end of the month into a savings account at an annual rate of 14.64 percent, compounded monthly. How much money will be in the amount after you made the last payment?

Solution

This question is based on the concept of future value of annuity. Annuity is fixed amount paid after a regular interval of time. Future Value of $ 1 = (((1+i)^n)-1)/i Where, = (((1+0.0122)^72)-1)/0.0122 i = 0.1464/12 =     0.0122 = $ 114.29 n = 6*12 = 72 Future Value of annuity of $ 401 = $         401 * $ 114.29 = $45,828.57 Thus, after last payment amount will become $ 45,828.57