What is the future value of a single lump sum saving deposit of $50,000 after 5 years, assuming the interests compound monthly with APR (annual interest rate) of 6%? What is the future value of a series of monthly deposits of $800 over 5 years?
[Answer: FV=$67,442.51; FV=$56,095.10]
From the financial calculator, select the 'Investment' tab. Select the investment Type to be 'Monthly' from the Type drop-down list box. Enter 6 to the Discount Rate (meaning 6% APR). Enter 50,000 to the first row of the Cash Flow and then push the Enter key. Use mouse to click at the first row, keep on pressing the mouse left button, and drag (highlight) to row 61 (60 months for 5 years). You will see from the right panel showing that the FV @6% is $67,442.51.
You can obtain the same result by using the Annuity calculator. Select the ‘Annuity’ tab from the financial calculator. On the Savings sub tab, select 'Level Deposits' as the Type of Deposit. Select ‘Monthly’ as the compound Type. Enter 50,000 to the Present Value, 0 to the Monthly Payment, 6 to the Annual Interest Rate, 5 to the Time in Years. Select Future Value as the item to be calculated. Now click the Calc button. You get the same answer.
Keep on using Annuity calculator to solve the second question. Click C button
to clear all. Enter 0 to the Present Value, 800 to the Monthly Deposit Amount,
6 to the Annual Interest Rate, 5 to the Time in Years. Click Calc button. You
get the future value as $56,095.10. If you select the Deposit made at the End
of the period, you get a slightly less amount of $55,816.02.
Use the Investment Calculator to verify the answer. Enter 0 to row 1. Enter 800 from row 2 to row 61. Highlight the range from row 1 to row 61. This means at the beginning of the 60th month you still deposit and at the end of the 60th month, which is the beginning of the 61st month. You receive the Future Value of $55,816.02 at the end of the 60th month.