Sara quit smoking and saves $80 per month previously spent on cigarettes. She invests the money at 5% compounded monthly. How much will she have in 10 years?
A) $7,542.51
B) $17,919.63
C) $12,422.58
D) $11,898.88
E) $12,474.34

Question

Quizplus · Accepted Answer

The future value of a series of monthly investments can be calculated using the future value of an annuity formula: FV = P * [((1 + r)^nt - 1) / r], where P is the monthly investment ($80), r is the monthly interest rate (5% annual, so 0.05/12 per month), n is the number of times the interest is compounded per year (12), and t is the number of years (10). Plugging in these values gives approximately $12,422.58.

Sara Quit Smoking and Saves $80 Per Month Previously Spent