You plan to save money for a down payment of $43,000 to purchase an apartment. You can only afford to save $6,000 at the end of every 6 months into an account that earns interest at 6.50% compounded monthly. How long will it take you to save the planned amount?
Express the answers in years and months, rounded to the next payment period
first we have to compute the monthly compounded rate to annual rate | ||||||
EAR = | (1+6.5%/12)^12-1 | |||||
6.70% | ||||||
Computation of semi-annual rate | ||||||
semi-annual rate = | ((1+6.7%)^(1/2)-1)*2 | |||||
6.59% | ||||||
now we can compute the number of year required using finanical calculator | ||||||
Put in calculator | ||||||
FV | 43,000 | |||||
PV | 0 | |||||
PMT | -6,000 | |||||
I | 6.59%/2 | 3.29% | ||||
compute N | 6.54 semi-annual period | |||||
Time required = | ||||||
3 year 4 month |
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