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  3. consider setting a goal with a longer term. you ha

consider setting a goal with a longer term. You have decided to save for your newborns...

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Basic Math

consider setting a goal with a longer term. You havedecided to save for your newborns college education and havedetermined that by the time the child reaches 18, you would likethem to have $10,000. you will make monthly deposits into anaccount that compounds monthly at an APR of 5.8%. How much will youneed to deposit every month to make your goal? what is your totalinvestment?

Answer & Explanation Solved by verified expert
3.7 Ratings (592 Votes)

Ans :

Given,

Future Value of Annuity (FVA) = $10,000

          Period (n) = 18 years

Interest Rate (r) = 5.8 %

                                  = 0.4833 % Monthly

         Future Value of Annuity (FVA) = Monthly Payment [(1 + r)n - 1 / r ]

                                           10,000 = Monthly Payment [(1 + 0.004833)18 * 12 - 1 / 0.004833]

                                           10,000 = Monthly Payment [( 2.8332 - 1) / 0.004833]

                                           10,000 = Monthly Payment * 1.8332 / 0.004833

                             Monthly Payment = 10,000 * 0.004833 / 1.8332

                             Monthly Payment = $ 26.36 ........

You will need to deposit $ 26.36 every month to make your goal and total investment is $ 5,693
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