Sanjeev starts saving for a holiday that he wants to take when he finishes his course. He decides to invest $200 per month, at the end of each month, by placing it into an account earning 6% per annum compounded monthly. He will do this for four years. Will Sanjeev reach his goal of $10 500? By how much will he fall short of or exceed his goal?
I know the answer is that he will reach his goal and that it is with an excess of $319.57. I cannot however get to this figure.
If you can get to the answer, can you please show working out so I can figure out where I went wrong. Thanks!
Yes, you are exactly right. He will exceed his goal by $319.57. To find out how you get this amount, we will use this formula to do that: FV=P{[1 + R]^N - 1/ R}=FV OF $1 PER PERIOD.
FV=200 {[(1 + .06/12)^(4*12) - 1] / .005}
FV=200{[(1.005)^48 - 1] / .005}
FV=200{[1.2704891 -1 ] / .005}
FV=200{.2704891 / .005}
FV=200{54.0978322}
FV=$10,819.57
And that is the proper way of calculating this particular investment. You have to be careful about your brackets and which operation is done first, and the next step after that until you do the final calculation.
