A person decides to put aside Rs 100 at the end of every month in a money market fund that pays 8% compounded monthly. After making 12 deposits, how much money does he have?
That 8% is 8/12 = 2/3 %per month I suspect so 1.00667 each time 12 times
the standard annuity equation is
N = 100 * [ 1.00667^12 - 1 ] / 0.00667
= 1244.36
Formula is not clear
If you look up "annuity" you will find something like
N = P [ (1+r)^n - 1 ] /r
r is the rate per deposit period
n is the number of periods
P is the amount deposited each period
for example:
.......ttps://www.educba.com/annuity-formula/
take the periods out and replace with h
remember you are doing months, not years.
But its very difficult to solve
1.00667^12 - 1 part
To find out how much money the person will have after making 12 deposits of Rs 100 each into a money market fund that pays 8% compounded monthly, we can use the formula for compound interest:
A = P(1 + r/n)^(n*t)
Where:
A = the final amount
P = the principal amount (initial deposit)
r = annual interest rate (converted to decimal form)
n = number of times interest is compounded per year
t = number of years
In this case:
P = Rs 100 (monthly deposit)
r = 8% = 0.08 (annual interest rate)
n = 12 (compounded monthly)
t = 1 year (since we are calculating the total amount after 12 months)
Let's calculate it step-by-step:
First, let's convert the annual interest rate to a monthly interest rate:
monthly interest rate = (1 + r)^(1/n) - 1
= (1 + 0.08)^(1/12) - 1
= (1.08)^(1/12) - 1
≈ 0.006561
Now, substitute the given values into the compound interest formula:
A = 100(1 + 0.006561)^(12*1)
≈ 100(1.006561)^12
≈ 1136.625063
Therefore, after making 12 deposits of Rs 100 each into a money market fund that pays 8% compounded monthly, the person will have approximately Rs 1136.63.