Question

Reuben has always dreamed of opening a café by the seaside. He decides he will save to help open the café by depositing money in an ordinary annuity that earns 5.4% interest, compounded monthly. Deposits will be made at the end of each month. How much money will he need to deposit into the annuity each month for the annuity to have a total value of $24,000 after 9 years? Do not round intermediate computations, and round your final answer

Answer 1

Answer:$ 66.5

Explanation:

Using ordinary Annuity formula

`FV=(P* \left [ \left ( 1+r\right )^n-1\right ])/(r)`

FV=future value=$24000

P=monthly payment

r=rate of interest =5.4%

for monthly
`r=(5.4)/(12)=0.45%`

n=number of payments
`=9* 12=108`

`24000=(P* \left [ \left ( 1+0.0045\right )^(108)-1\right ])/(0.0045)`

`108=P* (1.6240)`

P=$ 66.501

sop monthly deposit of $ 66.5 is required.