Problema Solution
Gage has set up an annuity due account and will be making monthly deposits of $265 for 13 years with deposits earning 6.2% per year compounded monthly. Find the interest earned.
Answer provided by our tutors
It is compounded monthly so our r = 6.2/12 = 0.517
Therefore the total number of periods durng which compounding takes place is 12*13 = 156
Hence in 13 yrs, the new account balance = 256(1.00517^156)
= 582.28
The accrued interest is then = 582.28 - 256 = 316.28