Question

In: Finance

Jessica wants to accumulate $14,000 by the end of 6 years in a special bank account,...

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.)

Solutions

Expert Solution

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


Related Solutions

If you deposit today $9,719 in an account for 6 years and at the end accumulate...
If you deposit today $9,719 in an account for 6 years and at the end accumulate $10,221, how much compound interest rate (rate of return) you earned on this investment? You will deposit 18,057 at 10% simple interest rate for 6 years, and then move the amount you would receive to an investment account at 10 % compound rate for another 3 years. How much money would you have at the end of the entire period? If you deposit today...
"You have three choices in placing your $14,000 in a bank account today for 9 years....
"You have three choices in placing your $14,000 in a bank account today for 9 years. Bank A pays 7.4% compounded annually. Bank B pays 6.82% compounded quatarly. Bank C pays 7.15% compounded continuously. Enter the amount of money that the best option would return after 9 years. There is no inflation."
1. What is the balance in a bank account at the end of 10 years if...
1. What is the balance in a bank account at the end of 10 years if $2,500 is deposited today and the account earnd 4% interest compounded annually? Quarterly? 2. If you deposit $10 in an account that pays 5% inteterst, compounded annually, how much will you have at the end of 10 years? 20 years? 50 years? 3. Suppose you deposit $100,000 in an account today that pays 6% interest, compounded annually. How long does it take before the...
Don wants to accumulate $55,000 in today's dollar terms in the next 6 years. He expects...
Don wants to accumulate $55,000 in today's dollar terms in the next 6 years. He expects to earn a return of 6.5% per year and inflation is expected to be 1.5%. How much should be the serial payment in the 4th year so that Don can achieve the target? $8471 $8598 $7195 $8727
How much will be in your bank account at the end of five years if you...
How much will be in your bank account at the end of five years if you invest $10,000 now at 12% per annum, compounded annually? And what if the interest rate is 12% per annum, but compounded monthly? b) In the poor areas of many cities around the world, we find people offering `pay-day’ loans. One loan agency in Dacca offers to loan Gita $20 till her pay cheque arrives in two weeks time. When it arrives, she must pay...
An individual wants to accumulate $750,000 for retirement in 30 years. She wants to make yearly...
An individual wants to accumulate $750,000 for retirement in 30 years. She wants to make yearly deposits into an account which earns 8% annually. Determine the size of the payments needed if the payments are made at: A: the end of the year. ($6620.58) B: the beginning of each year. ($6130.16)
Ali wants to accumulate at least $40,000 by depositing $1,600 at the end of each month...
Ali wants to accumulate at least $40,000 by depositing $1,600 at the end of each month into a fund that earns interest at 5.75% compounded monthly. a. How many deposits does he need to make in order to reach his goal? b. How long will it take Ali to reach his goal? year(s) month(s)
Suppose you invest $150 at the end of each month for 6 years into an account...
Suppose you invest $150 at the end of each month for 6 years into an account earning 6% annual interest compounded monthly. After 6 years, you leave the money, without making additional deposits, in the account for another 26 years. How much will you have in the end? How would I solve this using the "TI-84 plus Tvm solver"?
`1- Liz saved $270 at the end of every month for 6 years in her bank...
`1- Liz saved $270 at the end of every month for 6 years in her bank account that earned 3.70% compounded monthly. a. What is the accumulated value of her savings at the end of the period? a$21,393.49 b$21,729.45 c$196,528.63 d$2,289.45 b. What is the interest earned over the period? a$2,019.45 b$21,729.45 c$2,559.45 d$2,289.45 2- What nominal interest rate compounded semi-annually is equivalent to 3.63% compounded quarterly? % 3-If Lionel wants to earn interest of $3,547.75 on his $11,000.00 savings...
1) A young couple wishes to accumulate $35,000 at the end of four years so that...
1) A young couple wishes to accumulate $35,000 at the end of four years so that they may make a down payment on a house. What should their equal end-of-year deposits be accumulate the $35,000, assuming a 6% rate of interest?             a. $7,718             b. $8,000             c. $6,915             d. $8,765 2) The future value of $3,000 deposited at 11% compounded quarterly for each of the next six years is             a. $5,211             b. $5,611             c....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT