Mohammed's mother invests $200 for him each birthday up to and including his 18th birthday. The money earns 6% p.a. How much money will Mohammed have on his 18th birthday?
Answer = 6181.13
So, you have the answer.
You can't check it by plugging into your formula for annuities' future value?
I tried but i keep getting the wrong answer. Can you please help me
did you evaluate
200( 1.06^18 -1)/.06 ??
watch the order of operation, do the power first, then subtract the 1,
press = , then divide by .06
Thank you. I must have made a mistake in my working out.
To calculate how much money Mohammed will have on his 18th birthday, we need to compute the future value of the investment using compound interest formula.
The formula for calculating the future value (FV) of an investment is:
FV = P(1 + r/n)^(nt)
Where:
FV = future value
P = principal amount (starting amount)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
In this case, the principal amount (P) is $200, the annual interest rate (r) is 6% or 0.06, and the number of times interest is compounded per year (n) is 1 (because it's compounded annually). The number of years (t) is 18.
Plugging in these values into the formula:
FV = 200(1 + 0.06/1)^(1*18)
FV = 200(1 + 0.06)^18
FV = 200(1.06)^18
FV ≈ 6181.13
So, Mohammed will have approximately $6,181.13 on his 18th birthday.