00:01
In this problem, it has been said that a couple deposits $17 ,000 into account which earns 4 % annual interest for 25 years, we need to calculate the future value of the investment if the interest is compounded monthly.
00:17
Now, the formula for that is the future value, the final amount a, will be equal to the principal, which is the original amount invested, times 1 plus 1.
00:30
R divided by n to the power n t, where r is the annual rate of interest, n is the number of compounding periods per year, and t is the number of years.
00:42
So let us substitute the values into this formula.
00:45
The principal amount is $17 ,000 because $17 ,000 have been invested.
00:51
Then we have one plus r by so r is 4 %, 4 % annual interest, so 4%, which is 0 .04, we divide that by n.
01:02
Since the interest is compounded monthly, that means there are 12 compounding periods in a year, so n will be 12.
01:09
And here we have n, which is 12 times t.
01:12
T is 25 because the investment is for 25 years...