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Kym plans to deposit $100 in an account at the end of each month for the next five years so that she can take a trip
Kym plans to deposit $100 in an account at the end of each month for the next five years so that she can take a trip.
(b) How much will be in the account if the deposits are made at the beginning of each month?
Expert Solution
b). We can calculate the future value by using the following formula in excel:-
=fv(rate,nper,-pmt,pv,type)
Here,
FV = Future value
Rate = 6%/12 = 0.50% (monthly) (Assume)
Nper = 5*12 = 60 periods (monthly)
Pmt = $100
PV = $0
Type = 1
Substituting the values in formula:
= fv(0.50%,60,-100,0,1)
= $7,011.89
The Opportunity cost of capital is not given in question so I assumed the cost of capital is 6%.
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