Final answer:
To reach a future value of $15,000 over 6 years with 7% annual interest, you need to make regular monthly payments calculated using the future value annuity formula. After inputting the correct interest rate per month (0.07/12) and total payments (72), you would perform the calculation to find the exact monthly required payment amount.
Step-by-step explanation:
To determine how much you need to pay monthly to reach $15,000 over 6 years with an annual rate of return of 7%, you can use a financial formula that takes into account the present value of annuity. In this case, the future value annuity formula is more appropriate, which can be written as: FV = PMT × {[(1 + r)^n - 1] / r} Where: FV is the future value of the annuity, which in this case is $15,000 PMT is the payment amount per period (monthly payment) r is the interest rate per period (here it would be 7% annually, but we need to convert it to a monthly rate, so divide by 12) n is the total number of payments (6 years x 12 months = 72 payments) Rearranging the formula to solve for PMT gives us: PMT = FV / {[(1 + r)^n - 1] / r} Using the values provided: PMT = 15,000 / {[(1 + 0.07/12)^72 - 1] / (0.07/12)} You would then use a calculator to compute the exact monthly payment. Keep in mind, to reach the precise figure, you must input the exact terms of the rate and periods into your financial calculator or spreadsheet. Understanding compound interest and the power it has in investment scenarios is critical.