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...
The answer depends somewhat upon whether interest is compounded monthly, quarterly or annually, etc. It is easier to do if the interest is compounded monthly, the same frequency that investments are made.
A total of 25 x 12 = 300 payments of $50 are made into the account. Using this website:
http://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx
I get a total after 25 years of $42,516
Make that 42,516.84. There is a formula that could be used, but I don't know it. reiny probably knows the formula.
To solve this problem, you can use the formula for the future value of an ordinary annuity. The formula is:
FV = P * [(1 + r)^n - 1] / r
Where:
FV = Future Value
P = Monthly payment
r = Monthly interest rate
n = Number of months
Let's break down the problem step by step.
Step 1: Convert the annual interest rate to a monthly interest rate.
To convert the annual interest rate to monthly, divide it by 12, as there are 12 months in a year. In this case, the annual interest rate is 7.26%, so the monthly interest rate is 7.26% / 12 = 0.605%.
Step 2: Calculate the number of months.
Since Janene is investing for 25 years, which is equivalent to 25 * 12 = 300 months, we have n = 300.
Step 3: Plug in the values into the formula and solve for FV.
Using the formula mentioned above, plug in the values:
P = $50
r = 0.605% (as a decimal, so 0.00605)
n = 300
FV = $50 * [(1 + 0.00605)^300 - 1] / 0.00605
Now, use a calculator to compute the expression within the brackets, i.e., (1 + 0.00605)^300, and then divide the result by 0.00605. Finally, multiply the result by $50 to find the value of Janene's investment after 25 years.
So, plug in these values into the formula and calculate the answer using a calculator or spreadsheet software.