Originally Posted by

**daigo** For your problem:

Month 1: $0 principal + $25 deposited

5% compounded interest of $25 = $26.25

..........

Month 12: $372.928163 principal + $25 deposited

5% compounded interest of $397.928163 = $417.824571

So after 1 year the total is $417.824571 with 5% compounded monthly interest if you make a $25 deposit each month

You're somewhat on right track...but:

Month 1 is $25 (no interest).

You have to calculate interest using .05/12, not .05 : .05 each month means a 60% annual rate!

Works out like this:

Code:

M DEPOSIT INTEREST BALANCE
0 .00
1 25.00 .00 25.00
2 25.00 .10 50.10
3 25.00 .21 75.31
4 25.00 .31 100.62
...
12 25.00 1.17 306.97

Formula:

d = 25

n = 12

i = .05/12

F = ?

F = d[(1+i)^n - 1] / i = 306.97