Hi im unsure how do this problem becasue I do not how to go about these types of problems were you make monthely payments each month of the same amount...
Janene contributes $50 per month inot the Chaing China Bond Fund htat earns 7.26% annual intrerest. What is the value of Hanene's investment after 25 years (assuming that Mr. Chiang has not skipped twon with her dough?)
I don't even know what formula to use...
To solve this problem, you can use the formula for the future value of an ordinary annuity. An ordinary annuity is a series of equal payments made at regular intervals.
The formula for the future value of an ordinary annuity is:
FV = P * [(1 + r)^n - 1] / r
Here's how to use the formula to solve the problem:
1. Identify the given values:
- P = $50 (monthly payment)
- r = 7.26% (annual interest rate, which needs to be converted to a monthly rate)
- n = 25 (number of years)
2. Convert the annual interest rate to a monthly rate:
Since the interest is given as an annual rate, you need to divide it by 12 to get the monthly rate. In this case, r = 7.26% / 12 = 0.605%.
3. Plug the values into the formula and calculate the future value:
FV = $50 * [(1 + 0.605%)^(25*12) - 1] / 0.605%
To simplify the calculation, you can use a calculator or spreadsheet software. Here's a step-by-step breakdown of the calculation on a calculator:
- Enter: 1 + 0.605% = 1.00605
- Raise to the power of (25*12) = 300
- Subtract 1: 1.00605 - 1 = 0.00605
- Divide by 0.605% (0.00605 ÷ 0.00605) = 1
- Multiply by $50: 50 * 1 = $50
Therefore, the value of Janene's investment after 25 years would be $50.
Please note that the interest rate used in the calculation is an annual rate, so the actual interest earned over 25 years would be higher since it compounds monthly. Also, please double-check the formula and calculations before reaching a final answer, as there might be additional details or factors not provided in the question.