Question

You plan on putting money aside at the end of every month for the next 3 years in an annuity that pays an annual interest rate of 12%. (Monthly interest rate of 1%)

You expect that the car of your dreams will cost $35,450 in 3 years.

How much money should you put into the annuity every month?

Answer 1

FV of annuity
P = PMT x ((((1 + r) ^ n) - 1) / i)
Where:
P = the future value of an annuity stream	$     35,450
PMT = the dollar amount of each annuity payment	To be computed
r = the effective interest rate (also known as the discount rate)	12.68%	((1+12%/12)^12-1)
i=nominal Interest rate	12.00%
n = the number of periods in which payments will be made	3
FV of annuity=	PMT x ((((1 + r) ^ n) - 1) / i)
35450=	PMT x ((((1 + 12.68%) ^ 3) - 1) / 12%)
Each annual payment=	35450/ ((((1 + 12.68%) ^ 3) - 1) / 12%)
Each annual payment=	$ 9,875.37
Each monthly payment=	$     822.95