Answered

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if you invest $200 the end of each month over the next 20 years in a mutual fund that has a nominal annual rate of 12% how much will you get at the end of 20 years

Sagot :

hyderali230

Answer:

I will get $197,851 at the end of the 20 years.

Explanation:

Note: It is assumed the interest is compounded monthly

Use the following formula to calculate the amount to be received after 20 years

Future value of annuity = Annuity payment x ( ( ( 1 + periodic interest rate )^ Numbers of periods ) - 1 ) / periodic interest rate )

Where

Annuity Payment = $200 monthly

Periodic Interest rate = Nominal Interest rate / Numbers of periods in a year = 12% / 12 months = 1%

Numbers of periods = Numbers of years x Numbers of periods in a year = 20 years  x 12 months = 240 months

Placing values in the formula

Future value of annuity = $200 x ( ( ( 1 + 1% )^240 ) - 1 ) / 1% )

Future value of annuity = $197,851.07

Future value of annuity = $197,851

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