Math question

Question

You just purchased a $15000 GIC that earns interest at rate of 5.4% compounded monthly. the investment is left to grow for 18 years how much interest does your GIC earn in the last month of investment ?  

Answer 1

The formula to make this calculation is Future Value = Present value x (1 + r/n)^nt  where

 

FV = amount of money accumulated after n years, including interest

PV = present value 
r = annual rate of interest (as a decimal)
t = number of years
n = number of times the interest is compounded per year

The answer to this question involves four steps.

First, we must calculate the FV for years 1 through 18 (FV₁)

Second, we must calculate the FV for years 1 through 17 (FV₂)

Third, using the FV₂ as the starting point for the third calculation, we must compute the value for 11 additional months (FV₃).

Finally, we must subtract FV₃ from FV₁ to obtain the answer.

 

When the calculations are done, we will have $39562.03 - 39384.80 = $177.23