Question

Use the savings plan formula to answer the following question your goal is to create a college fun for your child suppose you find a fund that offers an apr of 7% how much should you deposit monthly to accumulate $87000 in 14 years?

Answer 1

The monthly deposit to reach the goal should be of $507.21

Step-by-step explanation:

Giving the following information:

Interest rate= 7% annual

deposit= monthly

Final value= $87000

n= 14 years

To calculate the monthly deposit, we need to use the following variation of the future value formula:

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

i= 0.07/12= 0.00583

n= 14*12= 168

A= (87,000*0.00583) / [(1.00583^168) - 1]

A= $507.21

The monthly deposit to reach the goal should be of $507.21