Assuming a 725 rate of return compounded monthly how much in

Assuming a 7.25% rate of return, compounded monthly, how much interest would a person earn in a savings plan that has monthly payments of $50 at the end of each month for 10 years? A) about $8880, B) about $4440 C) $2800 D) $15,000

Solution

Future Value = P[ {(1+r)^n -1}/r ]

r = rate of interest = 0.0725/12 =0.006 ; n = 10*12 = 120

P = 50

FV = 50[ ( 1 +0.006)^120 -1)/0.006]

= $ 8750.15

Total interest = 8750.15 -  120*50 = $2750.15

So, out of the given options Option C is near about the actual value