If I Save £100 A Month And Receive 5% Interest Every Year, How Much Will I Have Saved By 2034?

[Brackenheart]

I have methodically worked this out and checked all my answers once but have obviously gone wrong somewhere as my answer doesn't match any of the possibilities! I have made the answer either £38,478.86 or £41,662.80 if I include one more year.
The given answers are
A. £38,705
B. £39,623
C. £41,103
D. £43,104
Just going back to check again!

[bhg481]

It depends how the interest is added ie, whether they add the interest on as you go along or just once a year, adding 5% to the amount you've saved.
What you need to be very aware of is how much it will be worth in today's terms. Surprisingly with only a 4% inflation rate money roughly halves in value over 20 years so your savings are only going to be worth around £20,000 in today's terms if inflation is at 4%. Of course it's impossible to predict how inflation rates will vary over 20 years, I'm just trying to point out that even a fairly small inflation rate has a marked effect on the worth of your savings over 20 years.

[Fibonacci]

Assuming interest is calculated monthly @ 5%/12 = 0.4166667% pm on the amount in the account
Assuming this starts in Jan 2014 then I make the amount at the start of year 2034 to be £41,103.37

[Brackenheart]

Thank you both bhg481 and Fibonocci! Although the question specifically says interest is only added annually, not monthly, it seems to be too much of a coincidence that your answer comes out the same as one of the possibilities! Thanks for your help it is much appreciated!