Asked Feb 5, 2020

Karen owns a rental house in Ruston. Her policy requires the renter to make an initial deposit equal to the monthly payments which are $750. Whenever she receives her payments, she places the money into a savings account that has a 3.5% annual interest compounded monthly. Her renter gives the initial deposit on February 1, 2018. He pays on the first of the month every month for the next three years. How much will Karen’s savings be worth on February 1, 2021.


Expert Answer

Step 1

According to the information, the initial deposit is made on February 1, 2018 post which payments are made every month for $750 for the next 3 years, with a total payment periods of  37 ( 12*3 = 36 plus 1 initial deposit).

Step 2

Future value of annuity payments made of $750 for a period of 37 is calculated as below:

Finance homework question answer, step 2, image 1


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