Sam is saving for a trip to India. He will deposit a fixedamount every month...

Sam is saving for a trip to India. He will deposit a fixed amount every month in a bank account with an EAR of 7.5% starting today. If this account pays interest every month (monthly compounding) then how much should he deposit every month in order to have $10,000 in the account in two years' time?

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Expert Solution

Ehter the stroke in the financial calculator -
FV = -1000
N = 24 (2 *12 = 24 months)
I/Y =0.6045
CPT - PMT = 38.843
Every month deposit = $38.843 to get 1000 after 2 years
interest rate is calculated as
i = {(1 +rate)^period - 1 }*100
i = {( 1 + 0.075)^(1/12) - 1 } *100
i = 0.6045

jeff jeffy answered 1 year ago

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