RatedrillStart vs end of month deposits
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
Two coworkers each deposit $100 a month for 30 years into accounts earning 3.25% APR, compounded monthly. One deposits on the first day of each month, the other on the last day. How much more does the first-day saver have at the end of the 30 years?
What this problem teaches
The formula: FV(due) - FV(ordinary) = FV(ordinary) × i. Every deposit of the first-day saver earns one extra month of interest, so the whole balance is one month's interest larger.
A hint if you get stuck
An annuity due is the ordinary annuity times (1 + i), so the difference is FV(ordinary) × i.
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