Question

Travis International has a one-time expense of $1.13 million that must be pald two years from today. The firm can earn 4.3 percent, compounded monthly, on its savings. How much must the firm save each month to fund this expense If the firm starts Investing equal amounts each month starting at the end of this month?a. $38.416.20 b. $45,17202 c. $51,300.05 d. $47.411.08 e. $53.901.15

Answer 1

Answer:

Monthly deposit= $45,172.20

Explanation:

Giving the following information:

Travis International has a one-time expense of $1.13 million that must be paid two years from today. The firm can earn 4.3 percent, compounded monthly, on its savings.

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= 0.043/12= 0.003583

n= 2*12= 24

A= (1,130,000*0.003583)/ [(1.003583^24)-1]

A= 45,172.20