Question

You want to purchase a new car in 55

years and expect the car to cost

​$38,000. Your bank offers a plan with a guaranteed APR of 6.5%

if you make regular monthly deposits. How much should you deposit each month to end up with

​$38,000 in 5 ​years?

Answer 1

Answer:

Ans. you should deposit each month to end up with $38,000 the amount of $533.33 every month for 5 years at a APR of 6.5%

Step-by-step explanation:

Hi, first we have to convert all the data to monthly basis, that is, 5 years (5*12=60 months) and the rate of 6.5% APR offered by the bank (Monthly rate = 0.065/12=0,005666667  or 0.5667% monthly)

With that in mind, we need to solve for "A" the following equation.

$FV=\frac{A((1+r)^{n}-1) }{r}$

Where:

FV = Future value of the car

r = rate of return offered by the bank

n = number of periods that you are going to make the monthly deposit

That is:

$38,000=\frac{A((1+0,005667)^{60}-1) }{0,005667}$

$38,000=\frac{A(0,403599896)}{0,005667}$

$38,000=A(71,22351103)$

$A= 533,53$

Best of luck.