Question

Jessica wants to accumulate $14,000 by the end of 6 years in a special bank account, which she had opened for this purpose. To achieve this goal, Jessica plans to deposit a fixed sum of money into the account at the end of the month over the 6-year period. If the bank pays interest at the rate of 5% per year compounded monthly, how much does she have to deposit each month into her account? (Round your answer to the nearest cent.)

Answer 1

Payment required	=	FV*r /[(1+r)^n -1]
Future value	FV	14,000.00
Rate per period	r
Annual interest		5.0%
Number of payments per year		12
Interest rate per period		0.05/12=
Interest rate per period		0.417%
Number of periods	n
Number of years		6
Periods per year		12
number of periods		72
Period payment	=	14000*0.004167/ [(1+0.004167)^72 -1]
	=	167.14

Monthly payment is $167.14