Consider the two savings plans below. Compare the balances in each plan after 7 years. Which person deposited more money in the plan? Which of the two investment strategies is better?
Yolanda deposits $550 per month in an account with an APR of 6%, while Zach deposits $ 7000 at the end of each year in an account with an APR of 6.5
What is the balance in Yolanda's savings plan after 7 years?
To find the balance in Yolanda's savings plan after 7 years, we need to use the formula for calculating the future value of a series of monthly deposits:
Future Value = P * ((1 + r)^n - 1) / r
Where:
P = monthly deposit
r = monthly interest rate (APR / 12)
n = number of periods (in this case, 7 years * 12 months = 84 months)
Given that Yolanda deposits $550 per month, the annual interest rate is 6%, and the duration is 7 years, let's calculate Yolanda's balance:
Monthly interest rate (r) = 6% / 12 = 0.005
Number of months (n) = 7 years * 12 months = 84
Monthly deposit (P) = $550
Future Value = $550 * ((1 + 0.005)^84 - 1) / 0.005
Using a scientific calculator or spreadsheet software, the future value after 7 years will be approximately $56,698.74.
So, the balance in Yolanda's savings plan after 7 years is approximately $56,698.74.