Question

You are planning to save $350 at the end of every month to accumulate $20,000 for a down payment on a house. If you earn 5% interest compounded monthly, how many years would it take to save the $20,000?

Answer 1

- Periodic savings at the end of each month = $350

Future accumulated Value for down-payment = $20,000

Calculating the no of years it will take to accumulate the future Value:-

Where, C= Periodic Payments = $350

r = Periodic Interest rate = 5%/12 = 0.416666%

n= no of periods

Taking Log on both sides,

0.09275405311 = n*(0.00180580086)

n = 51.36 months

No of years = 51.36 months/12 months

No of years = 4.28 years

If you need any clarification, you can ask in comments.    

If you like my answer, then please up-vote as it will be motivating