In: Finance
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.)
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