Question

Suppose you want your daughter's college fund to contain $125,000 after 14 years. I you can get an APR of 7.8%, compounded monthly, how much should you deposit at the end of each month?

Answer 1

I'm not sure if this is correct but I think it might be 148.82

this is how I got my answer

1,908×7.8%=148.824 (put in the correct format it is 148.82)

148.82×12×14= 25,001.76

Answer 2

You should deposit approximately $250.55 at the end of each month to reach your daughter's college fund goal.

Step-by-step explanation:

We can use the future value formula with monthly compounding to calculate the required monthly deposit:

FV = PMT * ((1 + i)^n - 1) / i

where:

FV is the future value ($125,000)

PMT is the monthly deposit (unknown)

i is the monthly interest rate (7.8% / 12 = 0.65%)

n is the number of months (14 years * 12 months/year = 168)

Plugging in the values and solving for PMT:

PMT = FV * i / ((1 + i)^n - 1)

PMT = $125,000 * 0.0065 / ((1 + 0.0065)^168 - 1)

PMT ≈ $250.55

Therefore, you should deposit approximately $250.55 at the end of each month to reach your daughter's college fund goal of $125,000 after 14 years, assuming a 7.8% annual percentage rate (APR) compounded monthly.