First, we need to calculate the monthly interest rate:
r = 5% / 12 = 0.00417
Next, we need to calculate the number of compounding periods:
n = 12 x 25 = 300
Using the annuity formula, we can calculate the total savings:
S = 208 * ((1 + 0.00417)^300 - 1) / (0.00417)
S ≈ $123,866.02
Therefore, the answer is (D) $123,866.02.
Justin contributes $208 each month to a savings account that earns 5% annual interest. Calculate his annuity savings over the course of 25 years if the interest is compounded monthly.
Use
S
=
P
(
(
1
+
r
n
)
n
t
−
1
r
n
)
.
A.
$9.927.23
B.
$65,520.00
C.
$62,660.00
D.
$123,866.02
2 answers
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