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In: Finance

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

  1. 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?

Solutions

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 2 years ago
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