Question

Enola is saving money and plans on making monthly contributions into an account

earning a monthly interest rate of 0.4%. If Enola would like to end up with $5,000
after 3 years, how much does she need to contribute to the account every month, to
the nearest dollar? Use the following formula to determine your answer.

Answer 1

Enola needs to contribute $4,330.68 per month to the account.

How much does Enola need to contribute to the account?

Let's denote the monthly contribution as X.

The interest rate is 0.4% per month.

Since Enola plans to save for 3 years, the total number of months is:

= 3 * 12

= 36 months.

Using formula for compound interest: Future value = Present value * (1 + interest rate)^number of periods

We will plug values:

$5,000 = X * (1 + 0.004)^36

X = $5,000 / (1 + 0.004)^36

X = $5,000 / (1.004)^36

X = $4,330.68248

X = $4,330.68.