Question

Conor hopes to purchase a condo in 4 years. He opens an account earning 6.3% per year compounded monthly in order to save for the down payment. If Conor's goal is to have $25,000 for the down payment in 4 years, how much should he contribute each month into the account?

Answer 1

Conor should contribute approximately $520.73 each month into the account to have $25,000 for the down payment in 4 years.

Step-by-step explanation:

To calculate how much Conor should contribute each month into the account, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:

• A is the amount of money Conor wants to have ($25,000)
• P is the amount of money Conor contributes each month
• r is the annual interest rate (6.3%)
• n is the number of times interest is compounded per year (12 for monthly compound)
• t is the number of years (4)

Substituting the given values into the formula, we can solve for P:

25,000 = P(1 + 0.063/12)^(12*4)

Simplifying the equation, we find that P = $520.73. Therefore, Conor should contribute approximately $520.73 each month into the account to have $25,000 for the down payment in 4 years.