In 8 years Harry and Sally would like to have $12000 for a down payment on a house. How much should they deposit each month into an account paying 10% compounded monthly?
Just want to note that i’ve posted this before and i still haven’t received the correct answer. Any help would be appreciated!
Interest Rates / Annuities /etc. I Need This Formula Please?
09
Nov
gab BB-I live for Jesus
November 9, 2009 at 2:12 am
Every month they must pay 125$:
12000$/(8)(12)=125$
They must pay 10% of the money to the bank. so 125$ will be 90% of their monthly pay. 125$/90% = x$/100% -> x=(100)(125)/90
-> x=1250/9$
So they must pay exactly 1250/9 dollars every month or about 140 dollars monthly.
RyanB
November 9, 2009 at 2:17 am
EDITED. Sorry I have misunderstood the question due to I am eating my dinner.
Let PMT = the annuity regular payment deposit at the end of each month for the period of 96(12*8) months or 8 years.
i = the monthly interest rate = 10%/12 = 1/120.
n = the number of periods which compounding occurs = 12*8 = 96 months.
FV = the future value of the investment at the end of 96(12*8) periods.
PMT*FVIFAi,n = FV
PMT*FVIFA(10%/12),(8*12) = 12000
PMT*FVIFA(1/120),96 = 12000
i.e., PMT*{([1+(1/120))^(96)]-1)/(1/120)} = 12000
PMT = 82
So, they should deposit about $82 in each month into the account paying 10% compounded monthly.