Question

Suppose Maria deposits money every month into an account that earns 12% compounded monthly for 5 years. How much would she need to deposit monthly if she wanted a future value of $15,500?

Answer 1

Step-by-step explanation

We are told that Maria deposits money every month

at a rate of 12% compounded monthly for 5 years

If she wanted a future value of $15,500, we are told to find the monthly payment

To do so, we will make use of the following formula

But we are told it was compounded monthly,

since there are 12 months in a year

hence, we will have

`\begin{gathered} r=\frac{12\text{ \%}}{12}=(0.12)/(12) \\ \\ n=5*12 \end{gathered}`

So, we will have

`P=((0.12)/(12)(15500))/(1-(1+(0.12)/(12))^(-(12*5)))=344.79`

Therefore, she will have to deposit $344.79 monthly