Question

You have to repay a liability of $30,000 after 3 years from now. A bank is offering you 9% fixed interest rate for next three years if you deposit equal sum at the end of each month to have exactly $30,000 when the liability is to be paid off. How much you need to deposit into the bank account at the end of each month for next three years? If the bank demands $735 end-of-month deposits for next 3 years?

Answer 1

To have $30,000 after 3 years with a 9% fixed interest rate, you need to deposit approximately $725.92 at the end of each month for the next three years.

Step-by-step explanation:

To calculate the monthly deposit needed to have $30,000 after 3 years with a 9% fixed interest rate, we can use the formula for the future value of an ordinary annuity:

FV = P * ((1+r)^n - 1) / r

Where:

• FV is the future value ($30,000 in this case)
• P is the monthly deposit
• r is the monthly interest rate (9% divided by 12)
• n is the number of months (3 years times 12 months)

Plugging in the values, we get:

$30,000 = P * ((1 + 0.09/12)^(3*12) - 1) / (0.09/12)

Solving for P, the monthly deposit, we find that you need to deposit approximately $725.92 at the end of each month for the next three years to have exactly $30,000 when the liability is to be paid off.