Question

You want to purchase a new car in 3 years and expect the cost to be $15000. Your bank offers a savings plan with an annual interest rate of 5.5% if you make regular monthly deposits. How much should your monthly deposits be in order to end up with $15000 in 3 years? Round your answer to the nearest cent.

Answer 1

Answer:  1710.6 ( approx)

Step-by-step explanation:

Since, we have to find out monthly deposits be in order to end up with $15000 in 3 years.

Therefore, Our future value of annuity = $ 15000

But, we know that, future value of annuity = $P[\frac{(1+r)^n-1}{r}]$

Where, P is periodic payment

r is the rate per period

And, n is number of periods.

Since here P=? r = 5.5/12= 0.4583 (approx) and n= 36 months

Therefore, 15000= $P[\frac{(1+0.4583)^{36}-1}{0.4583}]$

⇒ P= 15000/ 8.76891732514 = 1710.58745839≈1710.6