Question

If Sheila wants to save 4,000 in 4 years how much money does she have to save monthly? with an interest rate of 0.5% Use the formula to find the amount to invest in each month t= years n= months Formula; Fv= PV ert-1/ er/n -1

Answer 1

we have the formula

$FV=PV\cdot\frac{e^{rt}-1}{e^{\frac{r}{n}}-1}$

where

FV=$4,000

t=4 years

n=4*12=48 months

r=0.5%=0.005

substitute given values in the formula

$4,000=PV\cdot\frac{e^{0.005\cdot4}-1}{e^{\frac{0.005}{48}}-1}$

Solve for PV

$PV=\frac{4,000\cdot(e^{\frac{0.005}{48}}-1)}{e^{0.005\cdot4}-1}$

PV=$198.03