- To purchase a new car in 4 years and expect the car to cost $76,000, you need to calculate how much money you need to deposit each month in a bank account that offers a guaranteed APR of 4.5%.
- You can use a formula called PMT to calculate the monthly deposit amount. PMT stands for payment and it is the amount of money you need to pay or deposit each period to achieve a certain future value.
- The formula for PMT is: PMT = ( FV * r) / [ ( (1+r)^n) - 1] where FV is the future value, r is the interest rate per period, and n is the number of periods.
- In your case, FV is $76,000, r is 0.045/12 (because the interest rate is 4.5% per year and there are 12 months in a year), and n is 4*12 (because you want to save for 4 years and there are 12 months in a year).
- Plugging these values into the formula, you get: PMT = (76000 * 0.00375) / [ ( (1+0.00375)^48) - 1] = 1449.72
- This means you should deposit $1449.72 each month to end up with $76,000 in 4 years.
I hope this helps you solve your problem.