Suppose you want to accumulate $9,365.60 for a down payment for a house. You will deposit...

Suppose you want to accumulate $9,365.60 for a down payment for a house. You will deposit $400 at the ending of every 2 months in an account that credits interest every 2 months at the rate of 18% per annum. How long will it take you to achieve your goal?

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Expert Solution

Inerest Rate for 2 months = 0.18*2/12 = 0.03

Period	Deposit/(Withdrawal) [beginning of period]	Opening Balance [Previous Closing+/-Deposit/Withdrawal]	Interest [Opening Balance*(0.03)]	Closing Balance [Opening Balance+Interest]	Deposit/(Withdrawal) [end of period]
0				0	0
1		0	0	0	400
2		400	12	412	400
3		812	24.36	836.36	400
4		1236.36	37.0908	1273.4508	400
5		1673.4508	50.203524	1723.654324	400
6		2123.654324	63.70962972	2187.363954	400
7		2587.363954	77.62091861	2664.984872	400
8		3064.984872	91.94954617	3156.934419	400
9		3556.934419	106.7080326	3663.642451	400
10		4063.642451	121.9092735	4185.551725	400
11		4585.551725	137.5665517	4723.118276	400
12		5123.118276	153.6935483	5276.811825	400
13		5676.811825	170.3043547	5847.116179	400
14		6247.116179	187.4134854	6434.529665	400
15		6834.529665	205.0358899	7039.565555	400
16		7439.565555	223.1869666	7662.752521	400
17		8062.752521	241.8825756	8304.635097	400
18		8704.635097	261.1390529	8965.77415	400
19		9365.77415

Therefore, it will take 18*2 = 36 months = 3 years

jeff jeffy answered 1 year ago

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