Accumulation of Regular Savings
This formula allows us to calculate an accumulated amount from a regular payment paid in arrears over a given period.
An example:
£250 is invested into an account at the end of each year, at an interest rate of 6% per annum, for 8 years. What is the value of the account after 8 years?
-First we know that P = 250, r = 0.06 and n = 8
-We then place these figures directly into the formula:
-Therefore value of the investment after 8 years will be £2,474.37
Questions - Use Your Note Taker To Jot Down Ideas / Calculations
- £500 is invested into an account at the end of each year, at an interest rate of 4%, for 6 years. What
is the value of the account after 6 years?
a) £3,316.49
b) £4,200.21
c) £3,567.45
d) £3,123.60
A)
We know that
P = £500, r = 0.04 and n = 6.
Put these figures into the accumulation of regular savings formula.
The value of the account after 6 years will be £3,316.49
2. £2,000 is invested into an account at the end of each year, at an interest rate of 6%, for 8 years.
What is the value of the account after 8 years?
a) £20,435.65
b) £17,987.98
c) £18,654.87
d) £19,794.94
D)
We know that P = £2,000, r = 0.06 and n = 8.
Put these figures into the accumulation of regular savings formula.
The value of the account after 8 years will be £19,794.94
- Further Study Text: Pages 160 - 165