Question

you want to save for a down payment on a new home in the future. you can invest $350 at the end of each month, and you expect to earn 6% apr compounded monthly on your investment. how much will you be able to have saved in 2 years?

Answer 1

The future value of monthly savings of $350 at an APR of 6% compounded monthly over 2 years is approximately $8,953.24. This is calculated using the future value of an annuity formula.

Step-by-step explanation:

To calculate the future value of a series of monthly investments, we use the future value of an annuity formula. Given a monthly investment of $350, an annual interest rate of 6% compounded monthly, and a saving period of 2 years, the future value can be computed. The formula for the future value of an annuity compounded monthly is:

FV = P * [((1 + r)^n) - 1] / r

Where:
FV is the future value of the annuity,
P is the monthly payment,
r is the monthly interest rate (annual interest rate divided by 12),
n is the total number of payments (months).

Plugging in the values, we get:
P = $350
r = 6% / 12 months = 0.005
n = 2 years * 12 months/year = 24 months.

Therefore, the future value after 2 years will be approximately:

FV = 350 * [((1 + 0.005)^24) - 1] / 0.005

Calculating this, the future value comes out to be about $8,953.24. So, after 2 years, you will have saved approximately $8,953.24.