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someone help me with this.
James wants to invest his pocket money. He receives £5 a month which he puts into a savings account earning
compound interest at 0·5% per month.
If James saves his money, how much will be in the account in five years’ time (to the nearest £)?
A £303
B £338
C £349
D £354hi
i think it’s a future value of annuities
as the rate is monthly,
5 years times will be 5*12=60 monthsVA value of annuity due
VA= a (1+i)^n -1/i
n the time, i=rate a= monthly saving VA=amount in 5 years
VA= 5(1.005)^60 -1/ 0.005= 348.80 to the nearest is £349,
for me it’s cI am not getting that answer. Unless I am inputting it wrong into the calculator?
#confused.sorry, I’m getting the same answer. You can post this question to the “ask tutor F2” forum maybe Sir John will help us.
josy87’s answer is correct.
First calculate the present value by multiplying $5 by the annuity discount factor for 60 periods at 0.5% (0.005) per period, using the formula for the annuity factor.
Then multiply the present value by (1.005)^60 to compound it up for 60 periods at 0.5% per period.
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