Question

Trey wants to take a European vacation in 3 years. He estimates the cost to be $10,000.

About how much must he save monthly in an account that pays 4% interest, compounded monthly, to have enough money for the vacation?

Answer 1

Answer:

Monthly deposit= $262.062

Step-by-step explanation:

Giving the following information:

Future value= $10,000

Number of periods= 12*3= 36 months

Interest rate= 0.04/12= 0.0033

To calculate the monthly deposit, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (10,000*0.0033) / [(1.0033^36) - 1]

A= $262.062