Question

Your goal is to create a college fund for your child. Suppose you find a fund that offers an APR of 7 %. How much should you deposit monthly to accumulate ​$88 in 18 ​years? You should invest​$ nothing each month.

Answer 1

You shoud invest $0.204, it is an small amount each month.

The formula to calculate the monthly saving is

`PP= (A(APR/n))/((1+(APR/n))^(nY)-1)`

with PP: periodic payments, A: amount desired, n: number of payments in one year, Y: number of years.

In this case A = 88, n= 12 (the payments are monthly), Y=18, APR=7%.

Replacing in the formula you obtain that
`PP \approx 0.204`