John deposited $2,000, at the END of every month for 2 years in a savings account. If the account paid 6% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.
A) $53,374.40
B) $44,320.00
C) $50,320.10
D) $50,863.92

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 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 a 6% annual interest rate, the monthly interest rate is $0.06/12 = 0.005$. John makes a $2,000 deposit at the end of every month for 2 years, which equals 24 payments. Plugging these values into the formula, or using a financial calculator or the appropriate table from a textbook (which is designed to simplify this calculation), we find the future value of John's account. The correct answer, based on the information provided and typical financial calculations, is closest to option D, $50,863.92. This accounts for the compound interest earned on the monthly deposits over the 2-year period.

John Deposited $2,000, at the END of Every Month for 2