Question

After getting her first job, a college graduate wants to begin saving money so she can pay cash for a new car. She wants to save enough each month to have $21,000 at the end of 4 years, and her savings account pays 4% interest, compounded monthly. How much will she have to save each month to reach her goal? Express your answer in $ to the nearest whole $.

Answer 1

The monthly payment for the student willbe of 404.16 dollars

Step-by-step explanation:

We have to solve for the monthly payment of a future value annuity

`PV / ((1+r)^(time) -1)/(rate) = FV\\`

FV 21,000

rate 4% / 12

time 4 years x 12 month per year

`21000 / (1-(1+0.00333)^(-48) )/(0.00333) = C\\`

C $ 404.160