Calculating FV

[JoJo999]

Here is the question: A man deposits $100 each month in an annuity for his child's college fund. He started doing this one month after the child was born. The annuity earned interest at an average rate of 6.8% compounded monthly until his child's 18 th birthday. What was the amount of the child's fund on his 18th birthday?

I know this is a Future Value question using formula: R[(1+i)^n-1)]/i

My problem is: do I do the 11 months separate and add that amount to 17 years. Or do I do the number of payments 17 x 12 +11=215 or what do I do?

Not sure how I calculate 11 months?

Please help

 

[tkhunny]

Basic Principles Answers ALL such Questions.

i = 0.068/12
r = 1+i

Value of Payment ON the 18th birthday: 100
Value of next to last payment: 100*r
Value of last 12 payment: 100 + 100r + 100r^2 + ... + 100r^11

Keep doing this sort of thing until you have considered all the payments. Then add them up.

 

[JoJo999]

FV

Thank you, thank you--you answered my question--the interest does not change but the number of payments become 17x12=204 + 11= 215--this is what I will use. Thanks again