Benigno deposited $1,000, at the END of every month for 3 years in a savings account. If the account paid 12% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.
A) $3,374.40
B) $4,320.00
C) $40,320.00
D) $43,076.88

Question

Quizplus · Accepted Answer

To find the future value of an annuity (in this case, monthly deposits into a savings account), we use the future value of an annuity formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $P$ is the payment amount, $r$ is the monthly interest rate (annual rate divided by 12), and $n$ is the total number of payments. Given an annual interest rate of 12%, the monthly interest rate is $12\% / 12 = 1\%$, or 0.01 in decimal form. Benigno makes a total of $3 \times 12 = 36$ payments. Plugging these values into the formula, or using a financial calculator or table designed for this purpose, would give the future value of Benigno's account as approximately $43,076.88 after 3 years, assuming he makes the deposits at the end of each month and the interest is compounded monthly.

Benigno Deposited $1,000, at the END of Every Month for 3