Math Question

Question

If you have $2400 in an account at the start and wish to add $150 to it monthly, how much will you have in 36 years if you assume an 6.25% consistent growth rate that is compounded monthly?

Please note that you will need both the compound interest formula that calculates a "lump sum" balance as well as the savings plan formula for the monthly payment. In other words, your investment can literally be broken down into two parts: the original lump sum $2400 and the continual $150 monthly annuity. They both earn the same APR of 6.25% compounded monthly.

 

Find the Final Balance: ???$ (Round to the nearest dollar and do not use commas.)

Answer 1

So:

 

1/ for the original lump sum $2400:

Present Value:  2400
Terms (in month):  432
Rate (in month):  0.005208333
Future Value:  $22,637.99

 

2/ for the monthly payment of $150:

Present Value:  0
Terms (in month): 432
Rate (in month): 0.005208333
Payment:  -150
Future Value:  $242,855.92

 

Total for both is:  $265494