Question

You plan to spend a semester abroad in France. You will live in France for 11 months starting 10 months from now. Each month in France will cost you $7,794 How much must you invest each month, for 5 months, starting next month to exactly pay for your trip if your investments earn 4.46% APR (compounded monthly)?

Answer 1

Calculating Presetn Value of Cost at the end of 9 months,

Using TVM Calculation,

PV = [FV = 0, PMT = 7,794, N = 11, I = 0.0446/12]

PV = $83,852.53

Present Value at the end of Month 6 = 83,852.53/(1 + 0.0446/12)³ = $82,924.48

Calculating Monthly Deposit,

Using TVM Calculaton,

PMT = [PV = 0, FV = -82,924.48, N = 5, I = 0.0446/12]

PMT = $16,462.07

Monthly Deposit = $16,462.07