You expect that you will need to replace your furnace in 5 yearsat a cost...

You expect that you will need to replace your furnace in 5 years at a cost of $15,725. How much must you save, each month for 32 months, starting next month (the same amount each month) if your savings account pays 2.41% APR (compounded monthly)?

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Expert Solution

r = 0.0241 / 12 = 0.00200833333

n = 28 i.e, ((5 eyars * 12 months) - 32)

Future Value required after 32 months = 15725 / (1+0.00200833333)^28

= 14865.9722756

Now, 14865.9722756 is required after 32 months,

Future Value Annuity =

r = 0.0241 / 12 = 0.00200833333

n = 32

14865.9722756 =

14865.9722756 = Periodic Payment * 33.016433517

Periodic Payment = 14865.9722756 / 33.016433517

Periodic Payment = 450.26

450.26 needs to deposited for 32 months.

jeff jeffy answered 1 year ago

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