Question

You would like to have $52,000 in 5 years for the down payment on a new house following college graduation by making deposits at the end of every three months in an annuity that pays 4.25% compounded quarterly. How much should you deposit at the end of every three months? How much of the $52,000 comes from deposits and how much comes from interest?

Answer 1

$2347; $46,940 from deposits and $5060 from interest

Explanation:

In this question, we are asked to calculate the 3 things. The amount deposited per month, how much of total deposits comes from the total $52,000 and the total amount coming from interest.

To proceed, we first calculate the regular payment. Afterwards we calculate the deposit to get the amount coming from the $52,000 total deposit.

Using the formula interest = Annuity - Total deposit , we get the value of the interest.

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