Question

Use the savings plan formula to answer the following question. Your goal is have 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 $186,000 in 16 years?

Answer 1

To accumulate $186,000 in 16 years with an APR of 7%, you should deposit approximately $632.80 per month.

Step-by-step explanation:

To find the monthly deposit amount to accumulate $186,000 in 16 years, we can use the savings plan formula:

1. Convert the annual interest rate to a monthly rate by dividing it by 12: 7% / 12 = 0.58333%.
2. Convert the number of years to the number of months: 16 years x 12 months = 192 months.
3. Plug the values into the savings plan formula: $186,000 = D * [(1 + 0.58333%)^(192) - 1] / 0.58333%, where D is the monthly deposit amount.
4. Solve for D: D = $186,000 * 0.58333% / [(1 + 0.58333%)^(192) - 1].

Using a calculator, we can find that the monthly deposit amount should be approximately $632