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18 October, 16:43

Suppose a recent college graduate's first job allows her to deposit $150 at the end of each month in a savings plan that earns 6%, compounded monthly. This savings plan continues for 9 years before new obligations make it impossible to continue. If the accrued amount remains in the plan for the next 15 years without deposits or withdrawals, how much money will be in the account 24 years after the plan began

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  1. 18 October, 17:10
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    Final Value = $51,312.68

    Explanation:

    Giving the following information:

    Monthly deposit = $150

    Interest rate = 0.06/12 = 0.005

    Number of months = 9*12 = 108

    First, we need to calculate the future value of the first investment. We will use the following formula:

    FV = {A*[ (1+i) ^n-1]}/i

    A = monthly deposit

    FV = {150*[ (1.005^108) - 1]} / 0.005

    FV = $21,410.99

    The second part of the investment:

    Number of years = 15

    Annual interest rate = 6%

    I will assume that the interest rate is annually compounded now. If this is not the case, just change the interest rate (0.005) and "n" (15*12=180)

    We need to use the following formula:

    FV = PV * (1+i) ^n

    FV=21,410.99 * (1.06^15)

    FV = $51,312.68
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