Use the savings plan formula to answer the following question. Your goal is to create a...

Use the savings plan formula to answer the following question. Your goal is to create a college fund for your child. Suppose you find a fund that offers an APR of 6%. How much should you deposit monthly to accumulate $83,000 in

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Expert Solution

SOLUTION:

From given data,

This question requires application of FV of annuity concept

FV of Annuity = P * [ ((1+r)ⁿ -1) / r ]

P = Periodic Payment

r = rate per period

n = number of periods

Where ,

FV = $83,000

r = 6% / 12 = 0.5% (monthly) = 0.5/100 = 0.005

n = 12 * 12

= 144 months

83000 = P * [ ((1+0.005)¹⁴⁴ -1) / 0.005 ]

83000 = P * 210.15

P = 83000 / 210.15

P = $ 394.96

you didn't mention how many years ...so ...as i have information i was submitted answer with 12 years ..if you want any other information ..please re post this question with full information.

orchestra answered 1 year ago

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