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31 October, 17:59

Paul Springer plans to save for a down payment for a house in 10 years. He will be able to invest $12,000 today in a money market account that will pay him an interest of 5.50 percent on a monthly basis. How much will he have at the end of 10 years?

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  1. 31 October, 21:56
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    The correct answer is $20,772.92.

    Explanation:

    According to the scenario, the given data are as follows:

    Payment (pmt) = $12,000

    Rate of interest = 5.50%

    Rate of interest per month (r) = 5.50 / 12 months = 0.46%

    Time = 10 years (n) = 120 months

    So, the future value can be calculated by using following formula:

    Future value = PMT * (1+r) ^n

    = $12,000 * (1 + 0.46%) ^120

    = $20,772.92

    Hence, the future value at the end of 10 years will be $20,772.92.
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