Question

Howard is saving for a long holiday. He deposits a fixed amount every month in a bank account with an EAR of 8.9​%. If this account pays interest every month then how much should he save from each monthly paycheck in order to have $ 12 comma 000 in the account in five ​years' time?

Answer 1

$159.52

Step-by-step explanation:

For computing the saving amount each month we have to applied the PMT formula i.e to be shown in the attachment below:

Given that,

Present value = $0

Future value = $12,000

Rate of interest = 8.9% ÷ 12 months = 0.741666%

NPER = 5 years × 12 months = 60 months

The formula is shown below:

= NPER(Rate;PMT;PV;-FV;type)

The future value come in negative

After applying the formula, the monthly payment is $159.52