Dinara K. answered • 04/27/20
Experienced financial analyst with 5+ years experience in Big 4
Basically, the question asks us to find future value of the investment in 15 years.
The formula to find Future value with compounding frequency is the following: FV=PV*(1+r/n)^(t*n)
PV=3,000
r=7%
n=12, as we have monthly compounding (there are 12 months in a year, if there is quarterly compounding we would use 4, as there is 4 quarters in a year etc)
t=15, as we have 15 years of deposit
FV=3,000*(1+7%/12)^(12*15)=$8,546.84 this amount of money we will have on our deposit in 15 years with monthly compounding
You can use your calculator or Excel to solve for this problem, look for FV function
PV=3,000
n=15*12=180
i=7%/12=0.005833
PMT=0
FV--->calculate = we have the same answer of $8,546.84
