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Periodic Deposit Rate: 3.75% compunded mnthly, time: 17, Fiancial goals 240,000. a. In...

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soman2006 | Student, Undergraduate | Salutatorian

Posted June 9, 2012 at 7:30 PM via web

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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?

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thilina-g | College Teacher | (Level 1) Educator

Posted June 9, 2012 at 7:52 PM (Answer #1)

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The future value of periodic investments is given by,

`F = P (((1+i)^n-1)/i)`

Where,

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

Therefore,

`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.

 

Sources:

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