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17 May, 22:07

An investor deposits $1000 in an account paying interest at a rate of 8%, compounded monthly, and also makes additional deposits of $25 per month. Find the balance in the account after 3 years.

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  1. 17 May, 22:16
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    Let r be the monthly interest rate: r =.08/12, and a = 1+r

    Balance after 3 years

    = 1000a^36 + 25a^35 + 25a^34 + ... + 25a, assuming the last deposit earn one month interest.

    = 1000a^36 + 25a (1-a^35) / (1-a)

    = $2258.63 <==Answer

    Attn: If the last contribution doesn't earn any interest, then the final balance should be 2258.63 + 25 = $2283.63.
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