Question

Recently, More Money 4U offered an annuity that pays 6.6% compouned monthly. If 2,303 is deposited into this annuity every month, how much is in the account after 11 years? How much of this is interest?

Answer 1

The account will have $10,622,946 and $10,318,950 are interests

Explanation:

The compound interest formula is:

Final Capital (FC)= Initial Capital (IC)*[(1+interest(i))]^(number of periods )

In this case:

IC= $2,303

i=6.6%

n=11*12=132

FC= $2,303*(1+6,6%)^132

FC=$2,303*(4612.65)

FC=$10,622,946

If there was no interest, the person who deposited $2,303, would have:

$2,303*132= $303,996

Then, the difference between the FC and $303,996, are interests:

$10,622,946-$303,996=$10,318,950