Finance Math: Annuities

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sportywarbz

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Lauren plans to deposit $5000 into a bank account at the beginning of next month and $200/month into the same account at the end of that month and at the end of each subsequent month for the next 5 yr. If her bank pays interest at a rate of 6%/year compounded monthly, how much will Lauren have in her account at the end of 5 yr? (Assume she makes no withdrawals during the 5-yr period. Round your answer to the nearest cent.)

Hello! So I either have to use the future or present value annuity. I'm guessing its the future value annuity.

The equation for this is: S=R [(((1+i)^n)-1)/(i)]

So... S=200 [(((1+(.06/12)^5)-1)/(.06/12)]

We have an online math book and so we can check our answers. I tried this and many other answers and nothing works.

Any idea where I'm going wrong? Do I have the wrong equation? Wrong number somewhere? I don't know... Thanks! :D
 
sportywarbz said:
Lauren plans to deposit $5000 into a bank account at the beginning of next month and $200/month into the same account at the end of that month and at the end of each subsequent month for the next 5 yr. If her bank pays interest at a rate of 6%/year compounded monthly, how much will Lauren have in her account at the end of 5 yr? (Assume she makes no withdrawals during the 5-yr period. Round your answer to the nearest cent.)

Hello! So I either have to use the future or present value annuity. I'm guessing its the future value annuity.

The equation for this is: S=R [(((1+i)^n)-1)/(i)]

So... S=200 [(((1+(.06/12)^5)-1)/(.06/12)]

We have an online math book and so we can check our answers. I tried this and many other answers and nothing works.

Any idea where I'm going wrong? Do I have the wrong equation? Wrong number somewhere? I don't know... Thanks! :D
Click to expand...

Are you taking into account the initial deposit of $5000?

Also your n = 60 (no of months in 5 years)
 
Yes. I've tried that also...if you change the 5 to a 60, and add $5000 to the final answer it equals 18,954.01 and that's also wrong.
 
sportywarbz said:
Yes. I've tried that also...if you change the 5 to a 60, and add $5000 to the final answer it equals 18,954.01 and that's also wrong.
Click to expand...
13,954.01 is correct as to the accumulation of the $200 monthly deposits;
BUT the $5000 has earned interest as well: so you need its future value; OK?
 
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