Question

Cost of $50,000 in 2024 (four years from today).

A.) How much will you need to set aside for 48 months at 6% nominal interest / year, compounded monthly, in order to pay the $50,000?

B.) Make 24 monthly payments at 6% interest, what are the monthly payments?

Answer 1

Answer A)

Future Value Annuity =

r = 0.06 / 12 = 0.005

n = 48 months

50,000 =

50,000 = Periodic Payment * 54.09783217

Periodic Payment = 50,000 / 54.09783217

Periodic Payment = 924.25

Answer B)

Future Value Annuity =

r = 0.06 / 12 = 0.005

n = 24 months

50,000 =

50,000 = Periodic Payment * 25.431955218

Periodic Payment = 50,000 / 25.431955218

Periodic Payment = 1966.03