Answer:
Explanation:
Since we're talking about making a deposit of a certain amount every month rather than just one big deposit, we are talking about an annuity. The formula for the value of an annuity is A(t)=d[(1+rn)nt−1](rn) where A(t) is the value of the annuity, d is the amount of each deposit, n is the number of deposits per year, t is the number of years, and r is the rate of interest. In this case we know we want the value of the annuity to be A(t)=$150,000, we want to make deposits every month, or 12 times a year, so n=12, we want to reach our desired value in 30 years, so t=30, and our account earns 7% interest, so r=0.07. We can plug in all of these values and solve for d to find the amount we need to deposit each month:
A(t)150,000150,000150,000d=d[(1+rn)nt−1](rn)=d[(1+0.0712)12⋅30−1]0.0712≈d[(1.00583)360−1]0.00583≈1,219.97d≈122.95
The amount you need to deposit each month is approximately $122.95.