Alex has decided to save $15 every month for his college fund. He makes his first $15 deposit in an account that pays 5% annual interest compounded monthly. How much interest will Alex have earned after 6 years?
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Remember, Alex is saving $15 every month. That means he is depositing $15 in his savings account 12 times per year.
Use the value of an investment calculator for help. Enter in Alex’s initial deposit; how much Alex saves each month; the interest rate; and how many years the fund will grow.
To determine how much interest Alex will earn, subtract the total of his deposits over 6 years from the total amount he will have with interest after 6 years. The difference is the amount of interest he will have earned.