Question

(1 point) In 7 years Harry and Sally would like to have $14000 for a down payment on a house. How much should they deposit each month into an account paying 11% compounded monthly?

Answer = $____________

Answer 1

$110.37

Explanation:

Assuming the monthly payment is made at the beginning of the month, the formula for the monthly payment P that gives future value A will be ...

... A = P(1+r/12)((1+r/12)^(nt) -1)/(r/12) . . . . n=compoundings/year, t=years

... 14000 = P(1+.11/12)((1+.11/12)^(12·7) -1)/(.11/12)

... 14000 = P(12.11)((1+.11/12)^84 -1)/0.11 ≈ P·126.84714 . . . . fill in the given values

... P = 14000/126.84714 = 110.37 . . . . . divide by the coefficient of P

They should deposit $110.37 at the beginning of each month.