Question

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

Answer 1

SOLUTION:

From given data,

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 12 years.

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.