What is the amount of an annuity if the payments are $60 at the end of each month for 10 years at 3.5% interest computed monthly?

Solution:

1. Determine the number of payments and the interest rate per period:

- Number of payments: n = 10 \times 12 = 120

- Monthly interest rate: i = \frac{3.5\%}{12} = 0.0029167

2. Use the formula for the future value of an ordinary annuity:

- Formula: FV = R \times \frac{(1 + i)^n - 1}{i}

- Where:

- R = 60 (monthly payment)

- i = 0.0029167 (monthly interest rate)

- n = 120 (total number of payments)

3. Calculate:

- Substitute values:

FV = 60 \times \frac{(1 + 0.0029167)^{120} - 1}{0.0029167}

FV\approx8605.95

4. Conclusion:

- The future value of the annuity is approximately USD 8605.95.