consider setting a goal with a longer term. You have decided to save for your newborns...

consider setting a goal with a longer term. You have decided to save for your newborns college education and have determined that by the time the child reaches 18, you would like them to have $10,000. you will make monthly deposits into an account that compounds monthly at an APR of 5.8%. How much will you need to deposit every month to make your goal? what is your total investment?

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Expert Solution

Ans :

Given,

Future Value of Annuity (FVA) = $10,000

Period (n) = 18 years

Interest Rate (r) = 5.8 %

= 0.4833 % Monthly

Future Value of Annuity (FVA) = Monthly Payment [(1 + r)ⁿ - 1 / r ]

10,000 = Monthly Payment [(1 + 0.004833)^{18 *
12} - 1 / 0.004833]

10,000 = Monthly Payment [( 2.8332 - 1) / 0.004833]

10,000 = Monthly Payment * 1.8332 / 0.004833

Monthly Payment = 10,000 * 0.004833 / 1.8332

Monthly Payment = $ 26.36 ........

You will need to deposit $ 26.36 every month to make your goal and total investment is $ 5,693

milcah answered 8 months ago

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