Periodic Deposit Rate: 3.75% compunded mnthly, time: 17, Fiancial goals 240,000.
a. In order to have 240,000 in 17 years how much should you deposit each month? round to nearest dollar?
b. $____of the 240,000 comes from deposit and $___comes from interes?
1 Answer | Add Yours
The future value of periodic investments is given by,
`F = P (((1+i)^n-1)/i)`
F - Future value
P - Periodic investment
i - Interest rate for the period
n -Number of periods
In this case,
F = 240000
P = ??
i = 0.0375 = 3.75% per annum
`i = 0.0375/12` per month = 0.003125 per month
`n = 17 xx 12` months = 204 months
`240000 = P (((1+0.003125)^204-1)/0.003125)`
`240000 = P xx 284.7571`
`P = 240000/ 284.7571 = 843` to the nearest dollar.
Therefore you must deposit 843 per month.
The total amount of deposits `= 208 xx 843 = 171972`
Therefore the interest `= 240000 - 171972 = 68028`
Therefore approximately 171972 comes from deposits and 68028 come from interests.
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