Amount per month (A) = $200 + $0.50 x $200 = $300
Interest rate (r) = 8.25% = 0.0825
Number of years (n) = 30 years
No of compounding periods in a year (m) = 12
Future value = ?
FV = A(1 + r/m)nm - 1)
r/m
FV = $300(1 + 0.0825/12)30x12 - 1)
0.0825/12
FV = $300(1 + 0.006875)360 - 1)
0.006875
FV = $300(1.006875)360 - 1)
0.006875
FV = $300 x 1,568.218999
FV = $470,465.70
The correct answer is D
Explanation:
In this case, there is need to apply the formula for future value of an ordinary annuity on the ground that compounding is done monthly. In the formula, monthly deposit (A) is $300, number of years is 30 years and interest rate (r) is divided by 12 because compounding is done on monthly basis. The number of years is also multiplied by the number of times interest is compounded in a year.
Explanation:
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