Question

Boris plans to set aside money for his young daughter’s college tuition. he will deposit money in an ordinary annuity that earns interest, compounded monthly. deposits will be made at the end of each month. how much money does he need to deposit into the annuity each month for the annuity to have a total value of after years?

Answer 1

To determine how much money Boris needs to deposit into the annuity each month, we can use the formula for the future value of an ordinary annuity. Substituting the given values and solving for P, we get P = FV * r / ((1 + r) ^ nt - 1).

Step-by-step explanation:

To determine how much money Boris needs to deposit into the annuity each month, we can use the formula for the future value of an ordinary annuity:

Where:

• FV is the desired total value of the annuity
• P is the monthly deposit
• r is the interest rate per period (monthly rate = annual rate / 12)
• n is the number of periods (number of years * 12)
• t is the number of years.

Substituting the given values and solving for P, we get:

P = FV * r / ((1 + r) nt - 1)

Make sure to convert the interest rate and number of years to their respective monthly and monthly equivalent values.