John got a part time weekend job at a local restaurant to save for a new car. He plans on depositing $120 per month for the next 4 years in a savings account with a rate of 4% per year compounded monthly. How much will he have saved toward his down payment at the end of the 4 year period?

FV = $6,230.15

Explanation:

Giving the following information:

He plans on depositing $120 per month for the next 4 years in a savings account with a rate of 4% per year compounded monthly.

First, we need to determine the monthly rate:

Interest rate = 0.04/12 = 0.0033

Now, we need to use the following formula to determine the final value:

FV = {A*[ (1+i) ^n-1]}/i

A = deposit = 120

n = 4*12 = 48

i = 0.0033

FV = {120*[ (1.0033^48) - 1]} / 0.0033

FV = $6,230.15