Question

howard is saving for a holiday. he deposits a fixed amount every month in a bank account with an ear of 14.7%. if this account pays interest every month then how much should he save from each monthly paycheck in order to have $14,000 in the account in four years' time? a. $220 b. $2853 c. $2816 d. $216

Answer 1

Howard should save approximately $2816 from each monthly paycheck in order to have $14,000 in his account in four years' time.

Step-by-step explanation:

To calculate how much Howard should save from each monthly paycheck, we can use the formula for compound interest:

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

Where:

• A = the future value (in this case $14,000)
• P = the monthly deposit
• r = the annual interest rate (14.7%)
• n = the number of times interest is compounded per year (monthly in this case)
• t = the number of years (4 years in this case)

Substituting the values into the formula, we get:

14,000 = P(1+0.147/12)^(12*4)

Simplifying the equation, we find that:

P = 14,000 / (1+0.147/12)^(12*4)

P ≈ $2816.22

Therefore, Howard should save approximately $2816 from each monthly paycheck in order to have $14,000 in his account in four years' time.