Question

You are considering investing in a bank account that pays a nominal annual rate of 7%, compounded monthly. If you invest $3,000 at the end of each month, how many months will it take for your account to grow to $275,000

Answer 1

To answer is 73.6 months(approximately 74 days)

Step-by-step explanation:

Future value (FV) = $275,000

Annual interest rate(i) = 7%

Monthly interest rate = 0.58%(7/13)

Periodic cash outflow (PMT) = $3,000

Number of months (N) = ?

Using a texas BA II Plus calculator

FV = 275,000; PMT = -3,000; I/Y = 0.583 CPT N= 73.6

Therefore the number of months is 73.6 months. Approximately, 74 days